Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1974-75 - One 'S' Bank was amalgamated with assessee-company under an agreement and assessee succeeded to all assets and liabilities of 'S' Bank except banking business - Assessee claimed income-tax and surcharge liabilities of 'S' Bank as business deductions - Whether, since, aforesaid liabilities arose to assessee-company under amalgamation scheme and not in course of its business, these were not deductible as business expenditure while computing total income of assessee - Held, yes Section 144B of the Income-tax Act, 1961 - Draft assessment order, reference to IAC - Assessment year 1974-75 - Whether where difference between returned income and income assessed was only Rs. 4,330, provisions of section 144B were not applicable - Held, yes FACTS The 'S' Bank was amalgamated with the assessee-company under an agreement and the assessee succeeded to all the assets and liabilities of the 'S' Bank except the banking business. The assessee claimed the income tax and surcharge liabilities of the 'S' Bank as business deduction. The assessee also claimed that a reference should be made to the IAC under section 144B. The ITO rejected both the claims. The AAC and Tribunal rejected the assessee's appeal. On reference : HELD So far as the contention of the assessee that the matter should be referred to the IAC under section 144B was concerned, the assessee's contention had to be rejected on the sole ground that the difference between the returned income and the income assessed was only Rs. 4,330, and, admittedly, it was not a case where the amount of variation between the two figures exceeded one lakh rupees. Therefore, this ground was rightly rejected by the authorities below. As regards the assessee's claim for income tax and surcharge liabilities of 'S' Bank, the Tribunal rightly held that the liabilities arose to the assessee-company under the amalgamation scheme and not in the course of its business. Therefore, aforesaid liabilities were not deductible as business expenditure in the computation of total income of the assessee. Note : The case was decided against the…

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