Law: Income Tax Act (XI of 1922)

Section: 10

Income tax Act (XI of 1922)-----   ---- S. 10(2)(ii), (xi), (xv)-Bad debt Expenditure incurred for purpose of floating company which was never formed Re payment of expenditure incurred for managed company waived by assessee Repairs Amounts spent for improvement of building taken on lease.   The assessee, which had as one of its objects the promotion of new companies and obtaining the managing agency of the companies so promoted, incurred large sums by way of preliminary expenditure to explore the possibilities of floating a proposed cement manufacturing company, which was, however, never formed. The assessee claimed the sums so expended as admissible deduction in computing its profits :   Held, (i) that the provisions of section 10(2)(xi) of the Income-tax Act, 1922 did not apply, because neither when the moneys were expended nor at any time thereafter was there a contract between the assessee and any other person that the assessee should get back the money ; there came into existence no debtor with a liability to pay the debt ;   (ii) on the facts, that there was no material on the record to hold that the money was spent in the usual course of the assessee's business with the hope of re imbursement after the proposed company was formed, and the Tribunal was justified in rejecting the claim under section 10(2)(xv).   The assessee took certain buildings on lease and expended moneys to improve them and make them fit for use as guest houses to accommodate its guests and claimed the moneys so spent as deductions in computing its profits :   Held, on the facts, that the assessee was not entitled to the deduction as it had failed to place material before the Tribunal to sustain its claim that the moneys had been expended on "current repairs" within the scope of section 10(2)(ii) of the Income tax Act.   The assessee had spent the sum of Rs. 6,240 in connection with the promotion of a textile mill company managed by it. It waived its claim to the amount as the company was in bad straits and was not a financial success and claimed the amount as a deduction in computing its profits ;   Held, on the facts, that the…