Law:

Section:

Section 10(2)(xv) of the indian income-tax act, 1922 [corresponding to section 37(1) of the income-tax act, 1961]-business expenditure-whether where tribunal finds that person in receipt of a sum as entertainment allowance from assessee did not do anything to promote sales of assesses in relevant account year and, therefore, there was no nexus between such payment and assessee's business, impugned payment could not be allowed as business expenditure-held, on facts, yes Section 10(2)(xv) of the indian income-tax act, 1922 [corresponding to section 37(1) of the income-tax act, 1961]-capital or revenue expenditure-assessee-company acted as managing agent of another company and received commission at certain percentage of profits of managed company-it paid certain amount as brokerage on sales of shares of its managed company and as travelling expenses incurred in connection with purchase of machinery for a concern of managed company-whether since impugned expenditure benefited assessee-company in its business by enabling it to earn more commission, it was allowable as revenue expenditure-held, on facts, yes Facts The assessee-company was the managing agents for two companies M and S and was receiving commission at a certain percentage of the net profits of the managed companies. The assessee paid a sum of Rs. 4,800 to G, the managing director of company M, as entertainment allowance and claimed the same as admissible business expenses under section 10(2)(xv). The Tribunal disallowed the claim on the factual finding that there was no evidence to show that, during the relevant year, G participated in the promotion of sales of the company's products. Company S decided to raise fresh capital to set up a paper mill. The scheme of floating the fresh issue of shares for the purpose of raising fresh capital was put into operation by the assessee as managing agents. The assessee paid a sum of Rs. 12,785 as brokerage on the sale of new shares. The assessee also paid a sum of Rs. 1,500 to K for his travelling expenses, being incurred in connection with the purchase of machinery for a concern of S. The assessee's claim for deducting these amounts as admissible business…

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