VIJAYAKUMAR MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) -

(2.) THE question referred for the decision of this court is :

(3.) THE Income-tax Officer also noticed that the sum of rupees two lakhs had been utilised ultimately for clearing debenture loans. It is not denied by the learned counsel for the assessee that the Krishnan, one of the partners of the agency firm, held debenture loans of the value of rupees two lakhs. As he had to be retired from the partnership of the managing agency firm, it became necessary that this debenture loan should be discharged. It was principally for this purpose that the loan appears to have been borrowed. It cannot be stated, however, as rightly argued by the learned counsel, that this amount was in fact utilised for that purpose. It is claimed that this sum went into the general revenues of the company and, in the course of the operation of the company, the funds of the company were utilised for the purpose of discharging those debenture loans. On the basis of this reasoning it is urged that the expenditure was not of a capital nature. We do not however think it necessary to express any decided opinion on this question, or upon the allied question whether the payment of the sum of Rs. 23,200 represented a commission paid to a financier as would, in that view, be an expense of a capital nature. Considering the angle from which the matter was approached both by the department and the assessee, the question really was whether even regarded as a revenue expenditure, it has been established that this expenditure had been laid out wholly and exclusively for the purpose of the business. Obviously, it is necessary to examine what the profit position of the company was at the time when it entered into this agreement.