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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1959-60 - Whether amount paid by assessee jute mill for purchase of loom hours was revenue expenditure deductible in computation of its business income- Held, yes FACTS The assessee-company, a jute mill, paid a sum towards the purchase price of loom hours. The ITO found it to be capital in nature on the ground that the loom hours, though an intangible asset, formed part of the profit-making apparatus of the assessee-company. He further observed that the right to use the loom hours was a capital advantage, brought in by purchasing rights of an enduring character. He also held that the loom hours constituted fixed capital assets of the business of the assessee-company and not circulating capital and that the payment made in consideration of acquiring an opportunity to earn profits was not expenditure of a revenue nature. As a result, the sum paid by the assessee was included in the income of the assessee. The Commissioner (Appeals) and the Tribunal held in favour of the assessee. On reference: HELD In view of the of the Supreme Court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 , it was to be held that the sum paid by the assessee for purchase of loom hours was a revenue expenditure deductible in the computation of the assessee's business income. Note : The case was decided in favour of the assessee. CASE REVIEW Empire Jute Co. Ltd. v. CIT[1980] 124 ITR 1 (SC)followed and relied upon. CASES REFERRED TO Empire Jute Co. Ltd. v. CIT[1980] 124 ITR 1 (SC) B.K. Bagchi and B.K. Naha for the Applicant. A.K. Roy chowdhury for the Respondent. JUDGMENT Ajit K. Sengupta, J.-At the instance of the Commissioner of Income-tax, the following two questions of law have been referred to this court under section 256(2) of the Income-tax Act, 1961, for the assessment year 1959-60: 1. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reassessment proceedings under section 147(b) of the Income-tax Act, 1961, were infructuous and invalid ? 2. Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,21,331 paid…

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