Law:

Section:

I. Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment year 1950-51 - Assessee-company was running sugar factory within area falling in jurisdiction of District board - State Government had empowered District Board to impose tax on any person carrying on trade within its jurisdiction.- Assessee claimed deduction of amount paid as District Board Tax - Whether business of running sugar factory was a trade and consequently, in order to carry on that trade at all, assessee had to pay taxes which became payable under District Board Act - Held, yes - Whether, therefore, expenditure in question was clearly an expenditure laid out or expended wholly and exclusively for purpose of business and was admissible under section 10(2)(xv) of 1922 Act - Held, yes Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessee claimed deduction of amount contributed to a school where children of assessee's workers studied - There was no contract between assessee and school authorities nor there was any agreement between assessee and its workers under which assessee was bound to maintain or assist in maintenance of a school for education of children of company's workers as a part of conditions of service of workers - Whether contribution in question was purely in nature of charity as it was an ex gratia payment being made by company to assist a school without any obligations towards school or towards its workers and said amount was, therefore, not admissible under section 10(2)(xv) of 1922 Act - Held, yes FACTS-I The assessee-company was running a sugar factory. For the assessment year 1950-51, it claimed deduction of certain amount paid as District Board tax. The assessee also claimed deduction of amount paid to a school in which the children of its employees were studying. The ITO disallowed the assessee's claims which was upheld by the AAC and the Tribunal. On reference : HELD-I The assessee was carrying on the business of running a sugar factory in the area…

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