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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 1958-59 - Whether expenditure incurred by assessee on stamps and registration charges for entering into an agreement with bank for obtaining an overdraft was allowable business expenditure - Held, yes FACTS For the assessment year 1958-59, the assessee-company claimed deduction of expenditure incurred on stamps and registration charges for entering into an agreement with the bank for obtaining an overdraft. The ITO would appear to have accepted that this was in fact an expenditure incurred for stamps, registration charges, etc., in respect of an overdraft agreement with the bank, but he disallowed it on the ground that it was not an expenses on the renewal of an agreement but for entering into a new agreement, and, as such, was capital expenditure in nature. The AAC agreed with this view and added that the expenditure did bring into existence a new asset of an enduring nature. On second appeal to the Tribunal, the agreement with the bank was not forthcoming and so it proceeded to decide the case on the basis of the facts found by the authorities below and endorsed the view that the expenditure was capital in nature. On reference : HELD When a loan is taken, the very idea of loan is that it is for the purpose of meeting a contingency. A loan may be taken for acquiring capital goods or for acquisition of the stock-in-trade or to meet the day-to-day running of a business. The very word 'loan' implies a liability, and it is, therefore, difficult if not impossible to conceive of a loan as something which brings into existence an asset of an enduring nature. In the statement of the case it was conceded that the expenditure was for the purpose of obtaining an overdraft from the bank. Overdraft facilities are generally for a limited period renewable from time to time, and as such no quality of permanence or of an enduring nature can possibly be ascribed to it. In any event, there was no material on the record for the finding given by the departmental authorities that the expenditure brought into…

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