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 - Assessment years 1957-58 to 1959-60 - One employee of assessee company was murdered while he was performing his duty - Assessee, through a board resolution sanctioned certain periodical pension to widow of said employee and also paid passage money to employee's family to send them to their native land and further some funeral expenses were also paid - Assessee claimed said expenditure as business deduction under section 10(2)(xv) of Act 1922, which was disallowed by all authorities bellow - Whether since there was nothing on recorded to indicate that generosity was a special virtue with assessee nor there was anything to indicate that murdered employee or his widow or children were special favourites of assessee, it was reasonable to hold that resolution to pay pension was passed by a commercial concern out of commercial consideration - Held, yes - Whether, therefore, expenditure in question could be allowed under section 10(2)(xv) of 1922 Act - Held, yes FACTS One 'B' joined the services of the assessee-company, on probation, and was later confirmed as a senior assistant the said 'B' was murdered in the company's yard: The board of directors of the assessee-company passed a resolution sanctioning a pension to the widow of the deceased employee. The assessee also paid passage money to B's family in sending them to their motive land and incurred certain expenditure in sending a wreath for and in repairing the grave of the said deceased employee. The assessee claimed deduction of these amounts in the year in which they were incurred. The ITO disallowed the claims of the assessee on the ground that the amounts claimed appeared to be ex gratia payments and were not expenditure incurred or laid out or expended wholly and exclusively for the business and as such deductions could not be allowed under section 10(2)(xv) of the 1922 Act. Order of the ITO was upheld by both the AAC and the Tribunal. On reference: HELD A payment made to employees in the expectation of creating impetus or encouraging them to put in…

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