He observed As per the information furnished by the auditors, Rs.
25 lakhs was for aug menting the working.
During the accounting year it obtained a loan of 40 lakhs of rupees from the Industrial Finance Corporation of India.
Commissioner of Income Tax 1 on the ground that in the Nagpur Electric Light 1 case money was expended for obtaining capital.
84,633 was number charged to revenue but capitalised and carried forward in the Balance Sheet, for purposes of income tax, the Companys auditors claim the same as an admissible item of revenue expenditure.
The question arises in respect of the assessment year 1950 51, accounting period April 1, 1949 to March 31, 1950.
Appeal by special leave from the judgment and order dated the October 31, 1961 of the Madras High Court in Tax Case No.
He held that the expenditure was incurred in obtaining capital and should be distinguished from interest on borrowed capital which was alone admissible as a deduction under S. 10 2 iii .
This loan was secured by a charge on the fixed assets of the companypany.
According to him, s. 10 2 xi specifically excludes from companysideration any item of capital expenditure.
25 lakhs of the loan was to be paid to Messrs A. F. Harvey, Limited, and Mathurai Mills, Limited in, discharge of the amount borrowed from them and utilised on the capital assets of the companypany.
Since Mr. S. T. Desai, the learned companynsel for the respondent, has disputed some facts as stated by the Appellant Tribunal, it would be companyvenient to give these facts in the words of the Appellate Tribunal.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The facts and circumstances of the case as stated by the Tribunal in the statement of the case are as follows The appellant, India Cements Limited, Madras, hereinafter referred to as the assessee, is a public limited companypany.
The Income Tax Officer refused to allow the deduction of Rs.
It cannot be stated definitely how the balance of 15 lakhs was used but the directors, while reporting on the accounts for the year ended 31 3 1949 on 4 10 1949 stated that that was utilised towards working funds.
V. Viswanatha Sastri, R. Venkataraman and R. Gopala krishnan, for the appellant.
T. Desai, Gopal Singh, B. R. G. K. Achar and R. N. Sachthey, for the respondent.
It is stated in the statement of the case that the proceeds of this loan was utilised to pay off a prior debt of 25 lakhs due to Messrs A. F. Harvey Limited and Madurai Mills, Limited.
In the accounts for March 31, 1953 this was written off by appropriation against the profits of that year.
67 of 1958.
The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Judicature at Madras answering the following question of law in favour of the respondent Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of rupees 84,633/ expended by the assessee in obtaining the loan or any part thereof is an allowable expenditure ?
1106 of 1964.
He further held that the case was number distinguishable from the decision in The Nagpur Electric Light and Power Co. v. Commissioner of Income tax, Central Provinces 1 .
84,633/ .
The Appellate Assistant Commissioner agreed with the Income Tax Officer.
The Appellate Tribunal distinguished the case of Nagpur Electric Light and Power Co. 1 6 I.T.C. 28.
funds of the companypany.
