MOTOR SALES LUCKNOW Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has, referred the following question under Section 66(1) of the Indian Income-tax Act, 1922 ;

(2.) THE assessee is a registered firm. It carries on business as a dealer in motor vehicles. During the relevant period it was a dealer of Tata Engineering and Locomotive Co. Ltd. (Telco), under an agreement with that company, for the sale of Mercedes Benz trucks. THE agreement required the assessee to maintain at its own expense an organisation for the sale of vehicles, providing for maintenance of show rooms, service centres, repair shops, etc., and an adequate staff of trained salesmen and a staff of trained technical service personnel. According to the statement of the case, the training was actually imparted by Telco which charged the assessee on that account. It is said that under the training scheme, Telco proposed to build a hostel for the apprentices and to recover the entire cost of the hostel from its several dealers. THE assessee paid Telco a sum of Rs. 7,242 during the accounting year ending December 31, 1960, and claimed that amount as a deduction from its assessable profits for the assessment year 1961-62. THE Income-tax Officer was of the view that the payment was made as the assessee's contribution towards the construction of the hostel, that the hostel would be the property of Telco and that, therefore, it was not a business expenditure. Accordingly, he rejected the assessee's claim.

(3.) AT the instance of the assessee, the Tribunal has now made the present reference.