Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1969-70 - Assessee-company paid income-tax liability of another company a part of whose business was purchased by it - Aforesaid payment was claimed as business expenditure -It was disallowed by ITO - Tribunal affirmed disallowance holding that payment in question was capital expenditure - Whether since liabilities of transferor-company formed part of consideration for acquisition of its business, expenditure in question representing liability of transferor-company and discharged by assessee was in nature of capital expenditure which was not deductible - Held, yes FACTS The assessee, a private limited company, engaged in the transport business, claimed deduction of certain amount as business expenditure for the relevant assessment year. This amount was paid by the assessee on account of the income-tax liability of another company, part of whose business had been purchased by it. The ITO disallowed the claim and his order was confirmed on appeal by the AAC. On second appeal, it was urged that a similar expenditure had been allowed in the earlier years by this court, Dashmesh Transport Co. P. Ltd. v. CIT [1974] 93 ITR 275 (P&H), and that would operate as res judicata and that the assessee had incurred the said expenses in the discharge of its liability as contained in article 18 of the articles of association in the ordinary course of its business and the same, therefore, was deductible as business expense. Both the contentions were negatived by the Tribunal, which found that the earlier did not operate as res judicata and that the expenditure in question was incurred by the assessee for acquiring income-earning apparatus and was thus a capital expense. On reference: HELD As in the earlier of High court no opinion had been expressed as to whether the alleged expenditure was the capital expenditure or a business expense, the could not operate as res judicata . Otherwise also, it is well settled that a finding on any matter in relation to a particular year of assessment does not operate as res judicata on a similar question in the subsequent assessment year.…

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