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 - Assessee claimed deduction of an amount paid to Life Insurance Corporation for entrusting liability for payment of pension to one employee whose services were extended on agreed terms as recorded by way of resolution - Whether payment of pension, could not be deemed to be in consideration of past services of employee was as a result of modification of service agreement which was for securing his services for a further period of three years - Held, yes - Whether that was a liability incurred by company long before date of his retirement and was incurred wholly and exclusively for purpose of business carried on by company - Held, yes - Whether payment made to Life Insurance Corporation was made "on ground of commercial expediency and in order indirectly to facilitate carrying on of business of Corporation" and there was also an expectation on part of employee getting the said sum and, therefore, payment could not be treated as gratuitous payment to employee - Held, yes - Whether payment was allowable as business expenditure - Held, yes FACTS The assessee was a limited company incorporated in the United Kingdom and carrying on business in buying and processing tobacco and as commission agents for other non-resident companies. It had a branch for the purchase and processing of tobacco in Guntur in the Andhra Pradesh State. It employed large number of Indian personal and labour to carry on its business and Indian national, 'M' took up employment in the company in 1938 as the resident manager of the branch at Guntur on a salary of Rs. 500 and a bonus. In 1949, he became a director of the company and was remunerated by a salary and a commission on purchase of tobacco leaf. He was, however, not admitted to the benefits of provident fund scheme introduced in 1946 to which all other employees were entitled. The terms of his service were incorporated in an agreement dated 4-7-1950. 'M' was due to retire in or about 1957. But in view of his invaluable services, the assessee-company intended to retain him. When he was…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492