Law: Income Tax Act, 1922

Section: 10(2)

Income-tax Act (XI of 1922)---S. 10(2)--Admissible expenses--Requirements. In order to make an expense admissible, it is not necessary that the same should be incurred by an assessee in discharge of any legal or contractual obligation in relation to his business. If any business expense is incurred bona fide by an assessee for the benefit of the business as a whole in broad sense, in that event notwithstanding that it may not bring any immediate benefit or profit to the assessees business, it will be an admissible expense in terms of section 10(2) of the Act. However, at the same time the Assessing Authority is entitled to examine the question, whether on the facts of a particular case a particular expense is to be allowed as a business expense or not. Eastern Investments Ltd. v. Commissioner of Income-tax, West Bengal (1951) 20 I T R 1; M/s. Ata Hossain Khan Ltd. v. Commissioner of Income-tax, East Pakistan, Dacca P L D 1969 S C 517 and Commissioner of Income-tax v. S. Zoraster & Co. 1982 P T D 339 ref. JUDGMENT This is an application under section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act) filed by the assessee upon the following question stated by the learned Income Tax Tribunal on the assessees application: "Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the payment of Rs.1,11,500 for staff indemnities for toss of personal effects in East Pakistan made by the assessee was of an ex-gratia nature and not an admissible expense under section 10(2) of the Income Tax Act." 2. The brief facts leading to the filing of the above reference application are that the assessee company had their registered office in Karachi upto 1968 but shifted the same in the same year to Dacca. However, in 1971 it decided to re-transfer its head office to Karachi, two of its employees M/s. S.S. Dhunjee and S.M. Taqi, who were originally employed to serve in Karachi office were transferred to Dacca on the shifting of the companys registered office. Upon re-transfer of the registered office to Karachi in 1971 the aforesaid two employees were re-transferred to Karachi, specifically on the…

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