COMMISSIONER OF INCOME TAX Vs. KAR VALVES LIMITED

JUDGEMENT

(1.) The Revenue is before us. The question referred reads: -

(2.) Facts lie in a narrow compass. The year of assessment is 1974-75, the corresponding accounting year ending on 31-3-1975. The assessee a public limited company, formerly known as Cochin State Power and Light Corporation Ltd. was carrying on the business of distribution of electricity in Ernakulam. On 2-12-1970 the undertaking was taken over by the Kerala State Electricity Board.

(3.) Subsequent to the nationalisation, the assessee company changed its name from Cochin State Power and Light Corporation Ltd. to M/s. Kar Valves Ltd. and with a view to start a new business of manufacturing automobile engine valves, chalked out a programme. During that period the assessee had to retain some of its staff and a mini office for purposes like realisation of the compensation amount from the Government, recovery of amounts due from consumers etc. 20 per cent of the expenditure, the assessee company had to meet in the year for the running of the office which came to Rs.45,215/-, was claimed as revenue expenditure. This amount accordingly was claimed as a deduction from the income received by the assessee company as interest on investments and securities and term deposits and dividend of Rs.2,144/ , all together coming to Rs. 87,797/-. During the year, the assessee had sold certain motor vehicles. The profit in this deal, came to Rs.2,470/-. This amount, however, was treated as profit, falling under S.41(2) of the Income Tax Act.