INDERCHAND HARI RAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS case involves a very short point but as the facts had not been very clearly set out in the statement of the case we had to wade through various papers to find out what exactly the facts were. The assessee is a registered firm which was acting as managing agents of the Shankar Sugar Mills Ltd., Captaingunj, Gorakhpur. The assessee was also carrying on the business as _sole selling agents. To carry on the latter business the assessee had an office at Kanpur. Under the Sugar Control Order, 1942, the Sugar Controller for India issued a Notification No. 32 -S. -C. (2) 42, dated 25 -4 -1942, to the following effect :

(2.) THE question for consideration is whether in these circumstances the assessee is entitled to claim that the expenses incurred in maintaining the selling agency office at Kanpur between 1 -10 -1944, and 7 -3 -1945, should be deducted as expenditure laid out or expended wholly and exclusively for the purpose of the selling agency business. The question referred to us is as follows :

(3.) IN considering, however, whether the expenditure can be deducted as business expenditure one must remember that Sub -section (2) (xv) is a part of Section 10 and at the time of the computation of the income of a business, though that income may be nil, the expenses incurred wholly and exclusively fcr the purpose of that business may be a permissible deduction, but in order to be deductible under this clause the expenditure must be incurred for the purpose of the business which was in existence in the accounting year and the profits of which are under assessment. If during the relevant period there was, in fact, no business either because it was discontinued or for some other reason it had ceased to exist, the question of computation if its income after deducting the expenses cannot arise. In the case before us, by reason of the Sugar Control Order and the notification issued thereunder, the assessee could not do any selling agency business in sugar. By merely maintaining an office at Kanpur it cannot be said that he was carrying on business the expenses of which he was entitled to deduct. There being, therefore, no business, there could be no question of computation of its income and no question of any deduction of expenses incurred wholly or exclusively for such business arises.