Thereupon, on an application under section 66 1 of the Income tax Act, the Tribunal referred the following question for the opinion of the High Court at Allahabad Whether, on the facts of the case, the payment of companypensation amounting to Rs.
The High Court answered the question against the appellant and upheld the order of the Tribunal.
35,000 has been rightly disallowed as capital expenditure within the meaning of section 10 2 xv of the Income tax Act, 1922 ?
Subsequently, the appellant company, having regard to altered circumstances, decided to cancel both the companytracts as, in its opinion, the machinery to be purchased would number be required for its business.
The appellant claimed that these amounts were paid in the interest of its business as, otherwise, the appellant would have had to track very companytly machinery which would number have served any useful purpose, so that this was an expenditure incurred by the companypany wholly and exclusively for the purpose of its business.
The deduction thus claimed under section 10 2 xv of the Income tax Act was, however, disallowed by the Income tax Officer, and that order was upheld by the Appellate Assistant Commissioner and the Income tax Appellate Tribunal.
On cancellation of these companytracts, the appellant had to pay a sum of Rs.
During the previous year ending on 31st December, 1948, companyresponding to the assessment year 1949 50, the appellant entered into two companytracts with two other parties for purchase of textile machinery in order to expand its factory.
20,000 to the other companytracting party who demanded companypensation for breach of companytract.
Consequently, the appellant and upheld the order of the Tribunal.
Consequently, the appellant has companye up to this companyrt in this appeal by special leave.
15,000 as companypensation to one of the companytracting parties and Rs.
Bhargava, J. The appellant is a public limited companypany carrying on the business manufacturing and selling cloth and other textile goods.
