Expenditure incurred at the time or for the purpose of closing the business cannot be considered as 'expenditure incurred for the purpose of such business'.

( 1 ) THIS is a reference made under section 66 (1) of the Indian Income-tax Act, to be referred to as the "act" hereinafter. The question of law referred is :

"whether the expenditure in the sum of Rs. 37,043-15-0 paid to the employees of the blank in the particular circumstances of the case is an allowable one under section 10 (2) (x) or 10 (2) (xv)of the Act ?"

( 2 ) SRI D. R. Venkatesha Iyer, the learned counsel for the assessee, did not avail of the assistance of section 10 (2) (x ). He conceded that that provision may not be applicable to the facts of the present case. Therefore, we have confined our attention only to the scope of section 10 (2) (xv) of the Act.

( 3 ) THE material facts of the case are as follows :

( 4 ) THE assessee was carrying on banking business with head office at Bangalore. It had one branch at Malleswaram and another at Shimoga. The branches at Malleswaram and Shimoga were closed in or about the middle of the year 1955. On 24th December, 1955, the following special resolution was passed :

"that the Mysore Standard Bank Ltd. be wound up voluntarily. Resolved that the employees of the bank, including those who had worked in the branches of the bank, which had already been closed, be paid, by way of compensation for termination of their services, their salaries for two months for each year of their service in the bank. "

( 5 ) AT this stage, it may be noted that the persons who were serving in Malleswaram and shimoga branches had been retrenched as and when those branches were closed.

( 6 ) THE question for consideration is whether the payments made in pursuance of the afore-mentioned resolution is deductible under section 10 (2) (xv), which reads :

"any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and 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, profession or vocation".

( 7 ) BEFORE considering the scope of the expression "laid out or expended wholly and exclusively for the purpose of such business", it is necessary to mention that there is no proof before us that any part of the sum of Rs. 37,000 and odd mentioned in the statement of case had been expended during the account year.

( 8 ) SIR D. R. Venkatesha Iyer, the learned counsel for the assessee, contended that the payment made to the employees is one that was to be required under law to be made and therefore that payment must be considered as having been made "for the purpose of such business".

( 9 ) WE shall first examine the contention whether there was any legal liability on the part of the assessee to make the payment in question ? From the resolution above noticed, it is clear that the payment in question was made for compensating the employees and the ex-employees whose services had to be dispensed with as a result of the closing of the bank. Sri Iyer did not invite our attention to any provision of law in force at the relevant time, under which the assessee was required to compensate the employees whose services the assessee had to dispense with, as a result of the closure of the bank. He contended that as a master, the assessee had to give reasonable notice of termination or in lieu thereof pay the salary of the period in question. The payment in question was not purported to have been made in lieu of notice. That much is clear from the resolution set out above. Therefore, the question whether any notice had to be given to the employees or salary in lieu thereof should have been given, does not arise for consideration in this case.

( 10 ) IT was next contended by Sir Iyer that on the principle of "social justice" - a term which is grossly misused - the employer had to pay compensation for terminating the services of his employees. "social justice" is a philosophy and not law. Courts are primarily concerned with law and not philosophy. If any prin