JUDGMENT
B.P. Jeevan Reddy, C.J.
1. Under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following three questions :
“1. Whether, on the facts and in the circumstances of the case, there was material before the Appellate Tribunal to hold that purchase of securities was necessary and customary for the purposes of the assessee’s business ?
2. Whether, on the facts and in the circumstances of the case, there was material before the Tribunal to hold that the loss on sale of securities amounting to Rs. 16,000 was incidental to the assessee’s business of manufacturing sugar ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in allowing the assessee’s claim of loss of Rs. 16,000 treating it to be a revenue loss incidental to the carrying on of the assessee’s business ?
2. The relevant facts are that the assessee is a public limited company carrying on the business of manufacturing sugar in Uttar Pradesh. While computing its income, it claimed a loss of Rs. 16,000 on account of purchase and sale of U. P. Land Development Bonds. The assessee’s case was that it had to purchase these securities in order to keep the district authorities pleased so that they may not exercise their discretion against the assessee in any matter concerning its business. The Income-tax Officer, however, disallowed this claim but on appeal, the Appellate Assistant Commissioner allowed the said deduction. The Department carried the matter in appeal before the Appellate Tribunal. The Tribunal dismissed the appeal following its earlier order in a similar matter. The Tribunal was of the opinion that purchase of the said Government Bonds was necessary for carrying on of the business of the assessee and was a matter of common occurrence. In other words, its finding is that business expediency required such purchases. In an identical matter in I. T. R. No. 862 of 1978
(CIT v. S. B. Sugar Mills [1991] 187 ITR 441), we answered identical questions in favour of the assessee. The decision of the Supreme Court in Patnaik and Co. Ltd. v. CIT [1986] 161 ITR 365, also leads to the same conclusion. There too, the assessee, dealing in automobiles, purchased certain Government Bonds with a view to induce the authorities to place an order for vehicles upon the assessee. The loss resulting from the sale of such Government Bonds was held deductible as a revenue loss.
3. For the above reasons, all the three questions are answered in the affirmative, i.e., in favour of the assessee and against the Department. No costs.