A. V. THOMAS & CO., LTD., ALLEPPEY vs THE COMMISSIONER OF INCOME-TAX,(BANGALORE) KERALA. Supreme Court, 25-10-1962

CourtSupreme Court (India)
JudgeKAPUR,J.L.
Parties A. V. THOMAS & CO., LTD., ALLEPPEYTHE COMMISSIONER OF INCOME-TAX,(BANGALORE) KERALA
Docket NumberAppeal Civil 214 of 1962
Date25 October 1962
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8
PETITIONER:
A. V. THOMAS & CO., LTD., ALLEPPEY
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAX,(BANGALORE) KERALA
DATE OF JUDGMENT:
25/10/1962
BENCH:
KAPUR, J.L.
BENCH:
KAPUR, J.L.
DAS, S.K.
SARKAR, A.K.
HIDAYATULLAH, M.
DAYAL, RAGHUBAR
CITATION:
1964 AIR 569 1963 SCR Supl. (2) 608
ACT:
Income Tax-Deduction-Bad debt-Expenditure-Amount advanced
for purchase of shares-Indian Income-tax Act, 1922 (11 of
1922), ss. 10(2) (xi) and (xv).
HEADNOTE:
The assessee company was incorporated in 1935 and its
Memorandum of association authorised it, inter alia, to
promote and to undertake the formation and establishment of
other companies and to assist any company financially or
otherwise. There was another company known as the Southern
Agencies Ltd. and Mr. A. V. Thomas was director of both
these companies. In 1948 the Southern Agencies Ltd. began
the promotion of a company to be known as the Rodier Textile
Mills Ltd., with a view to buying up a Mill known as the
Rodier Textile Mills. The assessee company made an advance
of Rs. 6 lakhs odd to the promoter for the purchase of 6000
shares of the new company. The public took no interest in
the new company and the whole project failed. No
application for shares was made on behalf of the assesee
company and no share was acquired. The Southern Agencies
Ltd., however, did not return the entire amount. On
December 7, 1951, it paid back only Rs. 2 lakhs which was
received in full satisfaction. The balance of Rs. 4,05,071-
8-6 was written off on December 31, 195 1, which was the
close of the year of account of the assessee company. For
the assessment year 1952-33 the assessee company claimed a
deduction of that amount as a bad debt actually written off,
or alternatively as an Expenditure, not of a capital nature
laid out or expended wholly and exclusively for the purpose
of its business.
777
Held, (1) that the amount advanced for the purchase of
shares was of a capital nature and, therefore, the balance
was not allowable as an expenditure under s 10 (2) (xv) of
the Indian Income-tax Act, 1922, as it was not the business
of the assessee company to buy agencies and sell them; and
in any event the amount was expended in 1948 and not in the
year of account ending December 31, 1951.

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