Law:

Section:

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-company was appointed as managing agents of a mill at certain remuneration and commission - Certain hundies were drawn by one of directors of assessee acting in capacity of managing agents of mill company in name of mill company - Bank claimed payment of said hundies from mill company, which repudiated its liability against which bank filed suit and obtained a decree of sum due under hundies - Subsequently, assessee entered into an agreement with mill company under which mill company was entitled to deduct from remuneration and commission payable to assessee any payment which said mill had to make in respect of decree - Accordingly, assessee paid to mill company certain amount and claimed deduction thereof under section 10(2)(xv) of 1922 Act - Whether since facts necessary to be established by assessee to support their claim under section 10(2)(xv) that expenditure was laid out wholly and exclusively for purpose of carrying on business, had not been established at any stage of proceedings, they were not entitled to deduction claimed - Held, yes Section 256, read with section 253 of the Income-tax Act, 1961 [corresponding to sections 66(1) and 33(1) of the Indian Income-tax Act, 1922] - Whether jurisdiction of High Court in matter of income-tax references is advisory jurisdiction and under Income-tax Act decision of Tribunal on facts is final, unless it can successfully be assailed on ground that there was no evidence for conclusions on facts recorded by it and, therefore, it is duty of High Court to start by looking at facts found by Tribunal and answer questions of law on that footing; any departure from this rule of law will convert High Court into fact finding authority, which it is not under advisory jurisdiction - Held, yes FACTS The assessee-company was appointed as the managing agents of a mill at a monthly allowance along with commission of 3 percent on all gross sales of goods manufactured by the mill. Certain hundies were drawn by one of the directors of the assessee, acting in the…

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