MADURA COATS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) A sum of Rs. 25,000 paid by the assessee to a purchaser of a property, which it had sold eight years earlier, has been disallowed as not forming part of its allowable business expenditure. The assessee's contention was that the payment was necessary even though it was voluntary, as the assessee had to sell the property free of encumbrances.

(2.) NO material was placed before the assessing authority by the assessee in support of that contention that there was an undischarged encumbrance which required the assessee having to pay the amount eight years later. The assessee itself had purchased the property several decades earlier and enjoyed the same and had sold it in the year 1968. After that sale, the Wakf Board had filed a suit against the purchaser, claiming a right to possession and the assessee was not a party to that suit. The purchaser appears to have entered into a compromise with the Wakf Board agreeing to pay a sum of Rs. 50,000. Subsequently, the purchaser received Rs. 25,000 from the assessee. There was clearly no encumbrance in favour of the Wakf Board, which came to be discharged by the payment made by the assessee.