COMMISSIONER OF INCOME TAX Vs. ADITYA MILLS LIMITED

JUDGEMENT

(1.) THE Income -tax Appellate Tribunal has referred the following questions of law arising out of its order dated May 29, 1980, in respect of the assessment year 1974 -75, under Section 256(1) of the Income -tax Act, 1961 :

(2.) THE brief facts of the case are that in the assessment year 1974 -75, the assessee claimed Rs. 1,86,764 as damages paid for breach of contract which included a payment of Rs. 41,998 to Indo -Burma Trading Corporation, Bombay, Rs. 1,17,767 paid to Keshavlal Talakchand, Rs. 7,606.90 to Mitter Tax Fabrics, Bombay, Rs. 14,893 paid to Mangal Textiles, Bombay, and Rs. 4,500 to Cotton Textiles Export Promotion Council. The Income -tax Officer came to the conclusion that in view of the provisions of Section 43(5) of the Income -tax Act, the amount of Rs. 1,86,764 is a speculation loss and cannot be allowed as deduction from the business profits. The sum of Rs. 68,620 was incurred in connection with the 10th anniversary of the company for which the Income -tax Officer came to the conclusion that some of the items are purely of charitable nature and the others are in respect of presents like wrist watches given by the company to the staff members in excess of Rs. 50 which is not permissible under the rules. The other items like gold bangles, silver plaques, given were also exceeding the limits prescribed under the rules and, therefore, they were also held not allowable.

(3.) IN respect of the claim of Rs. 68,620.94, the Commissioner of Income -tax (Appeals) came to the conclusion that the expenditure was not incurred on advertisement and observed that Rule 6(c) is not applicable and the gifts were made to the officers and staff on the 10th anniversary of the company and found that the expenditure was not in the nature of charity or otherwise not connected with the business. The addition was accordingly deleted.