Law: Income Tax Act, 1922

Section:

(a) Income-tax--Business expenditure---Interest---Nationalisation of transport business--­Interest paid on compensation payable to bus transport operators---Supreme Court holding nationalisation valid---Interest paid was deductible---Indian Income Tax Act, 1961. (b) Income-tax--- ----Business expenditure---Contribution to Cheran Welfare Trust---Is entitled to deduction---Indian Income Tax Act, 1961. (c) Income-tax--- ----Business expenditure---Expenditure on labour welfare---Subsidy paid to Cheran House Building Society---Allowable as revenue expenditure---Indian Income Tax Act, 1961. Held, (i) that the payments made by the assessee to the Cheran House Building Society were labour welfare expenditure and were allowable as a revenue expenditure. CIT v. T.V. Sundaram Iyengar & Sons (P.) Ltd. (1990) 186 ITR 276 (SC) affirmed. (ii) That the Supreme Court upheld the validity of the Act passed by the Government of Tamil Nadu in acquiring the bus transport undertaking. As a consequence the assessee was liable to pay interest to the individual operators on the compensation payable to them on taking over their business. The liability to pay interest was subsisting from the date of the enactment. Therefore, the interest paid was deductible. (iii) That the assessee was entitled to deduction of the contribution to the Cheran Welfare Trust in the computation of total income. Cheran Engineering Corporation Ltd. v. CIT (1999) 238 ITR 892 (Mad.) ref. JUDGMENT N.V. BALASUBRAMANIAN, J.--- The Revenue being aggrieved by the order of the Income-tax Appellate Tribunal, sought for a reference and the Appellate Tribunal has stated the case and the following three questions of law relating to the assessee's assessment year 1979-80 have been referred to us for our consideration:-- (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that interest payment of Rs.1,49,379 paid to ex-service operators of the bus service would qualify for deduction even though the Madras High Court has declared the nationalisation as null and void? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in…

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