Law:

Section:

Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment year 1946-47 - Whether expenditure incurred for purpose of preserving capital asset of a business could be properly regarded as revenue expense when there was a business going on and when capital asset was supporting an actual business - Held, yes - Assessee-company, carrying on business of purchase and sale of mica, claimed deduction of amount paid by it for obtaining lease of mica mines - Whether amount could not be allowed as business expenditure as no business activity in connection with mining of mica to which payment of amount related had taken place - Held, yes FACTS The assessee-company, which carried on a business of purchase and sale of mica, obtained two leases of mica mines. During accounting year relevant to the assessment year 1946-47, it paid certain amount by way of minimum royalty and claimed deduction thereof under section 10(2)(xv). The ITO disallowed the assessee's claim which was confirmed by the AAC and the Tribunal. The Tribunal held that assessee's business of mining mica was entirely distinct and separate from its business of purchase and sale of mica, that all that was done during the relative year of account was that some prospecting operations had been conducted. It was further held that no raising or sale of mica from the mines in question had taken place during the accounting year in question. On those findings the Tribunal came to the conclusion that there was no business to which the payment of the minimum royalty could be related or for the purpose of which the amount in question could be said to have been expended or laid out. On reference: HELD It ought not to be forgotten that it was the assessee who was claiming the deduction and it lay on the assessee itself to make out how it was entitled to the deduction it was claiming, and to that end, say what operations it had carried on during the relative year of account which, in its view, constituted business. Nothing whatever appeared to have been said at any stage. Even in its application for a referenced to the…

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