Law:

Section:

Section 29, read with section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2), read with section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business income - Computation of - Assessment years 1956-57 to 1959-60 - Assessee-company which running fleet of buses, claimed that commissions or rebate on its purchases of petrol and diesel oil, proceeds of sales of tyres, tubes and empty barrel through its drivers and conductors was not taxable income - Assessee also claimed that wayside expenses and payments of mamool was allowable an expenditure for which Board of Directors also passed a resolution - Department disallowed assessee's claims and added receipts to assessee's total income on ground that company could not give away part of its profits to its employees by merely passing resolution and disallowed expenditure in question for failure to prove it - However, on appeal, Tribunal allowed assessee's claims - Whether though generally onus of proving that expenditure had been actually incurred for and in course of business for earning income therefrom was undoubtedly on assessee, Tribunal was correct in its view that in very nature of expenditure, there could not be any documentary evidence to prove it - Held, yes - Whether though tips may be improper, they were not illegal and in view of finding of Tribunal that expenditure sought to be deducted was inevitable if assessee had to carry on its business and did not pertain to anything illegal or improper, Tribunal was right in allowing deduction - Held, yes Section 36(1)(iii) of the Income-tax Act, 1961 [Corresponding to section 10(2)(iii) of the Indian Income-tax Act, 1922] - Interest on borrowed capital - Assessee-company made advances to its directors and charged no interest - ITO disallowed portion of interest paid by assessee on moneys borrowed by it in proportion to what it could have charged from its directors - Tribunal found that total amounts of loans had increased and that fixed assets also increased but debit balance in director's account remained same - Tribunal, accordingly, concluded that there was no diversion of borrowed money for advancing directors and allowed deduction -…

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