Law: Income Tax Act, 1922

Section: 10

(a) Income tax---Capital or revenue expenditure 'Expenditure to protect trade or business Dissolution of firm on death of partner Assessee taking over assets of dissolved firm and carrying on business as proprietor and thereafter in partnership with son Suit by heirs of deceased partner for re opening dissolution and injunction restraining assessee from carrying on business Suit ultimately compromised by assessee making payment of lump sum to heirs of deceased partner Payment so made, held, allowable as deduction. (b) Precedent --Law laid down differently in two different decisions of Supreme Court by Benches of different strength Decision of larger Bench should be followed by High Courts Obiter dicta of larger Bench not to be followed. Dalmia Jain & Co. Ltd. v. C. I. T. (1971) 81 I T R 754 (S C) fol. V. Jagammohan Rao v. C. I. T. (1970) 75 1 T R 373 (S C) not fol. Associated Portland Cement Manufacturers Ltd. v. Kerr (1945) 27 T C 103 (C A) ; Broken Hill Theatres Proprietary Ltd. v. Federal Commissioner of Taxation (1952) 85 C L It 433 (Australia) ; C. I. T. v. Birla Brothers P. Ltd (1971) 82 I T R 166 (S C) ; C. I. T v. Polaniappa Chtetiar (S.V. R.M.) (1951) 20 I T R 170 (Mad.) ; Cooks v. Quick Shoe Repair Service (1949) 30 TC 460 (K B) ; Federal Commissioner of Taxation v. Duro Travel Goods Proprietary Ltd. (1953) 87 C L R 524 (Australia) ; Hallstroms Proprietary Ltd. v. Federal Commissioner of Taxation (1946) 72 C L R 648 (Australia) ; I. R. C. v. Carron Company (1968) 45 T C 18 (H L) ; Selvarjulu (N), Chetty & Co. v. C. I. T. (1965) 56 I T R. 29 (Mad.) Southern (H. M. Inspector of Taxes) v. Borax Consolidated Ltd. (1940) 23 T C 597 ; (1942) 10 I T R (Supp) 1 (K B) ; Sree Meenakshi Mills Ltd v. C. I. T. (1967) 63 I T R 207 (S C) and Sun Newspapers Ltd. and Associated Newspaper Ltd. v. Federal Commissioner of Taxation (1938) 61 C L R 337 (Australia) ref. JUDGMENT BAALASUBRAAHMAANYAN, J This reference from the Income tax Appellate Tribunal raises the perennial question of capital versus revenue expenditure. We may clear the ground first by excluding from our consideration lines of inquiry on which the indications are that they are unnecessary for the purposes…

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