# Shahzadanand v. Commissioner

- **Citation:** (2003) 1 ILRA 224
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2003-02-24
- **Case number:** Income Tax Appeal No. 39 of 2001
- **Bench:** M. Katju, Prakash Krishna
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/shahzadanand-v-commissioner-39978
- **Pages:** 3

## Headnote

Income Tax Act 1965- Section 37-
Business Expenditure those expenditure
which are although not permissible in
the eye of law- but can be allowed as
busiigness expenditure.

Held- Para 6

It may be mentioned here that even if
the amount is not legally due yet it can
be allowed as a business expenditure
U/s 7 of the Act, if it is made for
commercial expediency. A businessman
has to incur many expenditures which
are not due under any legal obligation
but to facilitate the business and for
commercial
expediency
vide
M/s
Shahzadanand
Vs.
Commissioner
of
Income Tax 21977 UPTC 48 (SC). Hence
these expenditures made for commercial
expediency
even
without
any
legal
obligation are allowable as business
expenditures under section 37.
Case law discussed:
(1991) 190 ITR 455
111 Taxman-81 cal. 111

## Text

http://www.allahabadhighcourt.nic.in
224 INDIAN LAW REPORTS ALLAHABAD SERIES [2003
waiting
list
and
therefore
unfilled
vacancies cannot be filled up. The
contention was rejected by this Court and
it was held that the remaining merit list
was to be treated as the waiting list and
unfilled vacancies were required to be
filled up. The said principle of law is fully
applicable in the instant case also. We are
informed that the SLP against this
judgment has also been rejected.

3. In view of the above this writ
petition is allowed. A mandamus is issued
to the respondents to promote the
petitioner in the cadre of Assistant Branch
Manager (Sales) for the year 2001-2002
forthwith.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 24.2.2003

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE PRAKASH KRISHNA, J.

Income Tax Appeal No. 39 of 2001

Commissioner of Income Tax, Agra

 ...Appellant
Versus
M/s Hind Lamps Ltd. Shikohabad (U.P.)

 ...Respondent

Counsel for the Appellant:
Sri Shambhu Chopra
I.T. Standing Counsel

Counsel for the Respondent:

Income Tax Act 1965- Section 37-
Business Expenditure those expenditure
which are although not permissible in
the eye of law- but can be allowed as
busiigness expenditure.

Held- Para 6

It may be mentioned here that even if
the amount is not legally due yet it can
be allowed as a business expenditure
U/s 7 of the Act, if it is made for
commercial expediency. A businessman
has to incur many expenditures which
are not due under any legal obligation
but to facilitate the business and for
commercial
expediency
vide
M/s
Shahzadanand
Vs.
Commissioner
of
Income Tax 21977 UPTC 48 (SC). Hence
these expenditures made for commercial
expediency
even
without
any
legal
obligation are allowable as business
expenditures under section 37.
Case law discussed:
(1991) 190 ITR 455
111 Taxman-81 cal. 111

(Delivered by Hon'ble M. Katju, J.)

1. This appeal under section 260-A
of the Income Tax Act has been filed
against the impugned order of the Income
Tax Appellate Tribunal dated 18-12-2000
vide annexure-3 to the Appeal.

The main point pressed by the
learned counsel for the department is that
the amount of Rs.9,82,426/- was wrongly
allowed by the Tribunal under section 36
(i) and (ii) or Section 37 (i) of the Income
Tax Act. This question has been discussed
in paragraph 5 of the impugned order of
the Tribunal. It appears that in the year
1978 the workers of the assessee went on
strike and the factory was closed for
almost a month. When finally the Chief
Minister of Uttar Pradesh intervened, an
agreement was reached, whereby certain
amount was to be paid over and above the
statutory bonus. Thereafter every year the
workmen
demanded
twenty
percent
bonus, which was the maximum limit
under the provisions of Payment of Bonus
Act, 1965. Thereafter, also the assessee
was paying to the workmen bonus above
http://www.allahabadhighcourt.nic.in
1All] Commissioner of Income Tax, Agra V. M/s Hind Lamps Ltd. Shikohabad 225
the
amount
legally
payable
under
Payment of Bonus Act, 1965.

2. It may be mentioned here that
under the Payment of Bonus Act, the
bonus (which deals with profit bonus) is
payable to the employees as a matter of
right and it is not the sweet will of the
employer to pay it or not. The scheme of
the payment of Bonus Act for calculating
bonus payable to the workmen is that we
have to start from the profit of the
previous year as mentioned in the profit
and loss account of the company. We
have then to add certain amounts and
subtract certain amounts which are
mentioned in the Payment of Bonus Act.
We then come to the available surplus.
Sixty percent of the available surplus is
the allocable surplus payable to the
workmen. The idea of giving bonus is that
since the workmen have contributed to the
prosperity of the concern, they are entitled
to share in the profit of the concern. There
may be several cases like the present
where the concern pays higher bonus than
what it is legally bound to pay under the
Payment of Bonus Act, and this higher
amount is often paid to keep harmony and
good ......... relationship so as to
facilitate the smooth business. In the
present case, as mentioned in para 8 of the
order of CIT (Appeals), the payment
above the legally due amount under the
Payment of Bonus Act was made to the
workmen because they had threatened to
stop the work and they resorted to mass
hunger strike, which continued for two
days.

3. In Commissioner of Income Tax
Vs. M/s Shaw Wallace and Company
Limited (1991) 190 ITR 455 similar facts,
as in the present case were involved. The
Calcutta High Court held that the payment
made above the amount due under the Act
to keep industrial peace was allowable as
a business expenditure. We are in
respectful agreement with the aforesaid
decision of Calcutta High Court.

4. Learned counsel for the appellant
then submits that the Tribunal was not
justified in deleting addition of 18% under
section 40 (A) (12) of the Income Tax
Act. The present appeal relates to the
assessment
year
1986-87.
Whereas
Section 40-A (12) was inserted in the
Income Tax Act by the Finance Act, 1985
with effect from 1.4.1986. Hence the
aforesaid provision will only relate to the
proceedings for the assessment year 198788 and onwards and not to the assessment
year
1986-87
with
which
we
are
concerned.

5.

Learned
counsel
for
the
department
then
submitted
that
the
Tribunal was not justified in upholding
the deletion of addition of Rs.16,350/-
made under Section 40-A (9) of the Act
by the Assessing Authority which was
paid as subsidy to certain Clubs, of which
the staff and workers of the assessee were
members. In our opinion Section 40-A (9)
of the Act has no application to the facts
and circumstances of the case as payment
was not made for formation or setting up
of any trust, not as contribution to the
same. The Learned Tribunal has relied
upon the decision in 111 Taxmen 81
(Calcutta) and 111 Taxmen 186 (Delhi).
We respectfully agree with the aforesaid
decisions.

6. It may be mentioned here that
even if the amount is not legally due yet it
can be allowed as a business expenditure
U/s 37 of the Act, if it is made for
commercial expediency. A businessman
http://www.allahabadhighcourt.nic.in
226 INDIAN LAW REPORTS ALLAHABAD SERIES [2003
has to incur many expenditures which are
not due under any legal obligation but to
facilitate the business and for commercial
expediency vide M/s Shahzadanand Vs.
Commissioner of Income Tax 21977
UPTC 48 (SC). Hence these expenditures
made for commercial expediency even
without any legal obligation are allowable
as business expenditures under section 37.

7. Thus there is no force in the
appeal and it is accordingly dismissed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.2.2003

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE PRAKASH KRISHNA, J.

Civil Misc. Writ Petition No. 273 of 2003

Shambhu Nath Patel

...Petitioner
Versus
The Taxation Officer, Allahabad and
another

 ...Respondents

Counsel for the Petitioner:
Sri A.R. Dube

Counsel for the Respondents:
S.C.

Motor Vehicle Taxation Act 1997- Act
1997- Article I- words and phases -
stage carriage- where there is absence
of prior contract between the Passenger-
and vehicle owner- the vehicle of stage
carriage-
where
the
passenger,
individually pay the rent as per distance
but where is vehicle run under contract
basis- is a contract carriage- hence the
Petitioner being operator of Contract
carriage-
liable
to
pay
the
tax
accordingly the petitioner liable to pay
the tax as per demand of authorities.

Held- Para 6
Learned counsel for the petitioner has
invited our attention to a Full Bench
decision in Brijendra Chaudary vs. State
Transport Authority (AIR 1991 Alld.
300). This decision in fact supports the
view which we are taking in this case. In
para 8 of the said Full Bench judgment it
has been held that in the case of stage
carriage
there
is
absence
of
prior
contract by the passenger or passengers
for the carriage to be used as a whole for
fixed or agreed sum. Instead, in case of
stage carriage when it is boarded by the
passengers on a route they pay for the
distance they propose to travel. Infact ,
this Full Bench decision also supports the
view, which we are taking that the
petitioners'
vehicle
is
not
a
stage
carriage but is contract carriage. This is
also the view of the Supreme Court in
Roshanlal vs. State of U.P. and others
(AIR 1965 SC 991).
Case law discussed:
AIR 1991 300 (Alld)
AIR 1965- SC- 991

(Delivered by Hon'ble M. Katju, J.)

1. Heard learned counsel for the
petitioner and the learned Standing
Counsel.

2. The petitioner has prayed for a
writ
of
mandamus
directing
the
respondents to charge additional tax at the
rate given in the proviso to Article 1 (a) of
Fourth Schedule of the Motor Vehicles
Taxation Act, 1997 and for a writ of
mandamus directing the respondents not
to compel the petitioner to deposit
additional tax at the rate given in Fourth
Schedule of the Motor Vehicles Taxation
Act, 1997.

3. The petitioner is a registered
owner of a bus, which carries the
staff/employees
of
Indian
Farmer
Fertilizer Cooperative Limited, Phulpur,
district Allahabad from their houses in