Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1977-78 - Assessee - company deriving income by way of licence fees from its house property and also carried on business in utilizing its weighing machine - It claimed expenditure incurred in carrying on its business - Expenditure incurred in respect of house property was separately shown - ITO held that expenditure claimed by assessee was incurred both for business and house property and thus disallowed expenditure attributable to house property - However, Tribunal allowed assessee's claim on finding that expenditure claimed by assessee - company was incurred for its business - Whether finding of Tribunal was finding of fact which could not be disturbed in reference proceedings - Held, yes FACTS The assessee-company was deriving income by way of licence fees, from its house property. It also carried on a business in utilizing its weighing machine. For the relevant assessment year, the assessee claimed certain expenditure stated to have been incurred for carrying on its business. The ITO held that the aforesaid expenditure was incurred both for the business and the house property. He estimated expenditure as attributable to the house property and disallowed the same in computing the assessee's business income. The Tribunal allowed the assessee's claim holding that the entire expenditure was incurred for business and thus deleted the disallowance made by the ITO. On reference: HELD Whether or not the expenditure was incurred for business was a question of fact. The finding recorded by the Tribunal was that the entire expenditure was incurred for business. That finding of fact could not be disturbed in the instant reference. So far as the house property was concerned, the assessee had separately shown the expenditure incurred by it. Therefore, one failed to see how the expenditure in question could have been treated as expenditure incurred for both the business and for the house property. There was no reason to disbelieve the assessee's statement that the said expenditure was incurred for business. That being the position, the assessee was entitled to deduction of…

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