Judgment

KHANNA, J.:- This judgment would dispose of five Civil Appeals Nos. 1494 to 1498 of 1971 by Special Leave filed by the Commissioner of Income-tax, West Bengal against the judgment of Calcutta High Court whereby the question referred to that Court under section 66 (1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) for five assessment years was answered in favour of the assessee respondent Coal Shipments (P) Ltd. During the pendency of the appeals, the name of the respondent was changed to Heilgers Investment Ltd.

2. The matter relates to the assessment years 1951-52, 1952-53, 1953-54, 1954-55 and 1955-56, the corresponding accounting years for which ended 31-3-1951, 31-3-1952, 31-3-1953, 31-3-1954 and 31-3-1955 respectively.

3. The respondent was one of the companies which exported coal from India to Burma before the Second World War. Amongst the other exporters were Messrs. Karamchand Thapar & Bros. Ltd., Messrs. Macheill Barry Ltd., Messrs. Andrew Yule & Co. Ltd. and Messrs. H. V. Low & Co. Ltd. The shipment of coal to Burma Railways before the war was the subject of open tender. After the cessation of hostilities in 1946, it became possible to resume the export of coal to Burma. In order to overcome the difficulties in the conduct of the trade following the war, the members of the coal trade in Bengal formed an association styled Coal Exporters and Charters Association. The respondent company as well as M/s. H. V. Low and Co. Ltd. were two of the major members of the said association. When M/s. H. V. Low & Co. Ltd. learnt of the resumption of coal export to Burma by the respondent in 1946, they also expressed intention to export coal to Burma. Thereupon the two companies came to an understanding and arrived at a mutual arrangement of agreement on the following lines:

(i) M/s. H. V. Low & Co. Ltd. would not export coal to Burma during the subsistence of the agreement.

(ii) M/s. H. V. Low & Co. Ltd. would assist the respondent in procuring coal for shipment to Burma.

(iii) The respondent would carry on the coal shipping business and pay M/s. H. V. Low & Co. Ltd. @ Rupees /5/- per ton (subsequently raised to Rs. 1/5/- per ton) of coal shipped to Burma.

4. According to the respondent, the last shipment of coal under the above arrangement was made in June, 1954 after which the arrangement came to an end automatically and the Government of Burma made some other arrangement for its coal requirement.

5. The assessee respondent claimed to have made the following payments to M/s. H. V. Low & Co. Ltd. or their nominees in pursuance of the aforesaid agreement during the period of five accounting years from Ist April, 1950 to March 31, 1955:

Rs.

1951-52 91,149

1952-53 1,77,898

1953-54 3,03,631

1954-55 2,32,355

1955-56 79,917

The amounts mentioned above were taxed in the hands of M/s. H. V. Low & Co. Ltd. The respondent claimed the payment of the above amounts as admissible business expenditure for the assessment years in question. The Income-tax Officer held that the expenditures claimed could not be allowed, as there was no written agreement in proof of the alleged arrangement and it was not possible to say that the payments were made for the purpose of the assessee s business. The Income-tax Officer further held that even assuming that the payments were made to keep off M/s. H. V. Low & Co. Ltd. from the Burma trade, they were payments to secure a monopoly and were not, therefore, allowable as revenue expenditure. The Appellate Assistant Commissioner on appeal upheld the order of the Income-tax Officer.

6. When the matter came up in second appeal before the Income-tax Appellate Tribunal, the Tribunal found that there was some discrepancy in the facts stated on behalf of the assessee and the Revenue. The Tribunal thereupon required the respondent company to swear an affidavit in support of the facts relied upon by it. In pursuance thereof, Sir Walter Michelmore, Director of Managing Agents of the respondent compa