Expenditure incurred for the purpose of preventing the extinction of a business is allowable as a deduction under S. 10(2)(xv) of the Income-tax Act.

Judgment

KAPUR, J. : This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income-tax Appellate Tribunal under S. 66(1) of the Income-tax Act. The following question was referred :

"Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spend by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under S. 10(2)(xv)?"

which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent.

2. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and therefore does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a considerable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing down the business, the respondent considered it expedient to remedy that defect. Therefore, in 1948, it established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did not prove a success and after having been in existence for three years it was closed down.

3. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under S. 10(2)(xv) of the Income-tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income-tax Appellate Tribunal. At the instance of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment.

4. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income-tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent s school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed.

5. Before the Appellate Assistant Commissioner, it was contended by the respondent, that the reason for incurring the expenditure was "to promote efficient Indian jockeys" and it was in the interest of the respondent to see that the races are not abandoned on account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was not the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following:

"It was the case of the assessee that unless it trained Indian Jockeys, time may come when there may not be suffic