DAMODARAN V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference by the Income Tax Appellate Tribunal, Madras Bench, under S.66(2) of the Indian Income Tax Act, 1922. The relevant assessment year is 1958-59; and the accounting period for the timber trade and the transport service with which we are concerned, the period from 1-1-1132 M.E. to 18-8-1132 M.E. The questions referred are:

(2.) The claim for deduction in respect of Rs. 5,154/- was based on the assertion that the assessee had paid Rs. 2,577/- to one Velayudhan Pillai and an equal sum to one Sridharan Pillai, forest contractors, in order to persuade them not to compete at the auction of a coupe by the Forest Department and thus secure a portion of the stock in trade for the assessees timber business at an advantageous price. The claim was denied by the Income Tax Officer on the ground that the expenditure was of a capital nature. He said:-

(3.) The Appellate Assistant Commissioner agreed with the Income Tax Officer. He dealt with the matter in the following terms: