Law: Income Tax Act, 1922

Section: 10,10(2)(xvi)

(a) Income-tax Act (XI of 1922)----S.10(2)(xvi)---Interpretation of S.10(2)(xvi), Income-tax Act, 1922--­Provision of S.10(2)(xvi) of the Act only prohibited claiming and allowing of an expenditure which was in the nature of capital expenditure or represented personal expenses of the assessee---Assessing Officer having failed to object to the expenses on the ground that these were not expended wholly and exclusively for the purpose of such business, profession or vacation; the disallowance could not be made. (b) Income-tax Act (XI of 1922)--- ----S.10(2)(xvi)---Allowable deduction---Provisions of S.10(2)(xvi), Income­tax Act, 1922 did not lay down that an expenditure was allowable only if there was any income. THIS ORDER PASSED BY : NASIM SIKANDAR, J.---This is a case stated by the Lahore Bench of the Income Tax Appellate Tribunal. The question framed for our consideration and answer reads as under:--- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the assessment with the directions to allow the expenditure incurred on procuring business when there was no income for computation? 2. The assessee-respondent in the two assessment years under review viz. 1977-1978 and 1978-1979 returned loss of Rs. 1,77,505 and Rs. 4,69,561 respectively. The Assessing Officer found that the loss in both years comprised of profit and loss- account expenses while no business income was returned in both years. The explanation put forth by the company that they could not procure business in both years was rejected. Accordingly the claimed loss was refused to be allowed. 3. The learned first appellate authority maintained the order of the Assessing Officer and concurred that their being no business, no expenses were admissible. 4. A Single Bench of the Tribunal, however, refused to accept the interpretation placed by the Revenue Officers on the provisions of section 10(2)(xvi) of the repealed Income Tax Act. He was of the view that the said provisions only prohibited claiming and allowing of an expenditure which was in the nature of capital expenditure or represented…

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