Judgment

SHAH, J.:- In proceedings for assessment of tax for the year 1945-46 the Lakshmiratan Cloth Mills- hereinafter called the Company - claimed allowance under Section 10 (2) (xv) of the Income-tax Act, 1922 of Rs. 18,90,000/- paid by it as compensation for termination of the managing agency of the firm Beharilal Kailashpat and Rs. 13,300/- incurred as expenditure in respect of arbitration proceedings in connection with the determination of compensation. The Income-tax Officer disallowed the claim. The order was confirmed by the Appellate Assistant Commissioner and by the Income tax- Appellate Tribunal. The High Court of Allahabad in a reference under Sec. 66 (2) of the Income-tax Act, 1922, held that there was material on which the Tribunal could hold that the allowance claimed was not spent wholly and exclusively for the purpose of the company s business.

2. The facts which give rise to the reference require to be stated in some detail. The Company was incorporated in 1934. The shares of the Company were held in equal moities by members of two families, who way for the sake of convenience be referred to as Singhanias" and "Guptas". Under a deed dated August 3, 1934, Singhan