Judgement

Appeal (No. 10 of 1948) from a judgment of the High Court at Nagpur (December 8, 1944) delivered on a reference made to it under s. 66, sub-s. 1, of the Indian Income-tax Act, 1922, by the Income Tax Appellate Tribunal, Bombay.

This appeal raised a short question as to the application of s. 10, sub-s. 2 (xii), of the Indian Income-tax Act, 1922, as amended by the Indian Income-tax (Amendment) Act, 1939, in respect of assessments on the appellants for the years 1940-1 and 1941-2. That paragraph provided that in computing profits or gains of a business for the purpose of income tax an allowance was to be made for " any expenditure " (not being in the nature of capital expenditure or personal " expenses of the assessee) laid out or expended wholly and " exclusively for the purpose of such business . . . . "

The relevant facts, which are taken from the judgment of the Judicial Committee, were as follows. The appellants carried on business at several places in the Central Provinces of India as manufacturers and vendors of country made cigarettes, which were known as bidis. Those cigarettes were composed of tobacco contained or rolled in leaves of a tree known as tendu leaves, w