COMMISSIONER OF INCOME TAX Vs. HINDUSTHAN MOTORS LTD

JUDGEMENT

(1.) THIS reference, under s. 66(1) of the Indian IT Act, 1922, has been made under circumstances hereinafter related.

(2.) THE assessee is a manufacture of motor cars and has a factory within the territorial limits of Kotrang Municipality. THE location of the factory is a little distance away from the Grand Trunk Road. THEre is an approach road from the Grand Trunk Road to the factory premises of the assessee which road belongs to the Government of West Bengal. THE said approach road fell into disrepair and began to cause transportation difficulties to the assessee. THE Government was not prepared to meet the expenses for the repair of the road. THEreupon, the assessee offered to contribute a sum of Rs. 39,770, namely, the amount necessary for improvement of the said approach road. THE offer was accepted by the Government. THEreafter, there was a formal written agreement dated August 14, 1959, made between the Government and the assessee under the terms whereof :

(3.) IN our opinion, the contention laid on behalf of the assessee must be upheld. IN order to ascertain whether an expenditure has been incurred wholly and exclusively for the purposes of business, one must look to the direct concern and direct purpose for which the money is laid out. It is always possible that the expenditure while benefiting the assessee may confer equal benefits on other person also. This, however, will not change the character of the expenditure incurred by the assessee, if the same had been expended solely with a view to benefit the carrying on of his business. The purpose must be the purpose of the assessee's own business and the expenditure must have been incurred for that purpose. On the facts, as we have stated above, it is clear that the assessee spent that money not with any idea of benevolence but with a clear purpose before it, namely, to facilitate the transport of the cars manufactured in its factory. It is true that the assessee was not under any legal obligation to improve or repair the road; this, however, is no criterion for judging the issue before us. A sum of money expended even if not by necessity but voluntarily, but if the same facilitated the carrying on of the assessee's business, it was surely an expenditure wholly and exclusively incurred for the purpose of the business. IN this view of the matter, in our opinion, the sum of Rs. 39,770 was spent wholly and exclusively for business and therefore must be allowed as a deduction from the profits of the assessee."