SOUTHERN AGENCIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE first of the questions that was referred to this court under section 66(2) of the Indian Income-tax Act, 1922, ran :

(2.) THE assessee company had as one of its objects promotion of new companies and obtaining the managing agency of the companies so promoted. THE claim of the assessee was that it incurred preliminary expenditure to promote a cement company to be known as Arcot Cement Co., and in the three years of account in question expended large sums to explore possibilities for successfully launching that contemplated cement company. Eventually the cement company was never formed. THE moneys had been spent by the assessee. THE assessee claimed these sums as lawful admissible deductions in computing its profits in the relevant assessment years.

(3.) THE second question was : "Whether, on the facts and in the circumstances of this case, the sums of Rs. 95,860, Rs. 2,835 and Rs. 3,143, spent by the assessee in improving the guest house during the previous years for the assessment years 1948-49, 1949-50 and 1950-51 respectively can be allowed as a proper deduction in computing the profits assessable to income-tax under section 10(2) of the Act ?"