Law: Income Tax Act, 1922

Section: 10(2)(xv)

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 1946-47 - Assessee-company was incorporated in former Indian State of Bhor - It entered into agreement with Diwan of that State for purpose of introducing new industries in that State, by which State agreed to grant certain concessions, namely: (i) to give assessee sole monopoly for starting and working of factories in Bhor State for ten year's; (ii) not to increase land tax or impose additional tax on lands of assessee; (iii) not to charge income tax and taxes on profits of any kind, and (iv) to exclude application of industrial and labour laws to assessee for specified period - Assessee, in consideration of these benefit, agreed to pay to State specified percentage of its profits and claimed same as deductible business expenditure - Whether by making said payments to State assessee had secured an advantage for enduring benefit of business and, therefore, expenditure was not chargeable to revenue but was a capital expenditure - Held, yes Section 4(1)(a), read with section 33, of the Indian Income-tax Act, 1922 - Income - Accrual of - Assessment year 1946-47 - Assessee-company carried on business in former Indian State of Bhor - It received payments from companies in British India for work done through cheques drawn on banks in British India which assessee's local banker, acting as its agent for collection, presented at office of British India bankers for encashment - ITO held that those monies had been received in British India and were liable to be taxed under section 4(1)(a) - AAC allowed assessee's appeal but Tribunal remanded case to him - Whether Tribunal had not acted arbitrarily or capriciously in remanding matter to AAC for further enquiry by giving parties opportunity to lead evidence and to ascertain whether cheques were sent by post or by hand and whether cheques, if sent by post, were sent on request of seller, either express or implied, and post office at which cheques were posted, because those aspects were not before ITO when matter was before him and which became relevant…

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