JUDGMENT
C.S.P. Singh, J.
1. The Income-tax Appellate Tribunal has in compliance with the directions issued by this court under Section 66(2) of the Indian Income-tax Act, 1922, referred the following question of law for our consideration :
“Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of Rs. 26,000 under Section 10(1) or Section 10(2)(xv) or Section 12 of the Indian Income-tax Act, 1922 ?”
2. The petitioner is a Hindu undivided family and Sri Jugal Kishore is the karta thereof. He was a director on behalf of the Hindu undivided family in Messrs. Ram Chand Sugar Mills (Private) Ltd. The board of directors of the company consisted of two groups. One group being of Sri Jugal Kishore and Sri Purshottam Das and the other of Lala Roshan Lal and Sri Ram Swaroop. These directors held twenty-five per cent. shares each in the company. The affairs of the company, in accordance with the articles of association, was to be managed by the two sets of directors aforesaid in rotation. In the relevant year, the company was being managed by Sri Jugal Kishore and Sri Purshottam Das. Large stock of unlifted
sugar was lying with the company on account of the fact that the control price of sugar was higher than the prevailing market price, and a subsidy by the Government was under contemplation. Sri Jugal Kishore and Sri Purshottam Das requested the Government to release the stock of sugar, and thereafter sold the sugar at the market price. As a result of the sale, the company did not get the Government subsidy which was expected to be of the tune of Rs. 1,04,000. Sri Jugal Kishore and Sri Purshottam Das on being blamed by the other set of directors for incurring this loss paid an amount of Rs. 13,000 each to Sri Roshan Lal and Sri Ram Swaroop. The assessee as such paid Rs. 26,000 and claimed this as a deduction. This claim has been rejected by the revenue authorities. Counsel for the assessee has submitted that the loss aforesaid can be claimed as a deduction either under Section 10(1) or Section 10(2)(xv) or Section 12 of the Indian Income-tax Act, 1922. We are of the view that the contention is without substance and the view taken by the Tribunal is right. The loss on account of the fact that the company was unable to collect the subsidy was that of the company, and the assessee being a mere shareholder cannot claim that as a business loss or expenditure deductible either under Section 10(1) or Section 10(2)(xv) of the Act. The mere fact that other directors might have become entitled to a higher dividend, in case the assessee had waited for the subsidy, and the amount was paid by way of compensation to the other set of directors will not convert the amounts shelled out by the assessee into a business expenditure claimable either under Section 10(1) or Section 10(2)(xv) of the Act. The amount spent was not spent by the assessee for the purposes of facilitating the carrying on of the business of the manufacture of sugar for that business did not belong to him but was that of the company. We fail to see how this amount can be claimed under Section 12 of the Indian Income-tax Act, 1922. Counsel for the petitioner has suggested that this amount was spent for the purposes of earning dividends and director’s fee. We are unable to appreciate this contention. There is nothing to indicate that in case the amount had not been paid by the assessee to the other directors, the dividend or the director’s fee which the petitioner was to get from the company would have teen withheld. The amount in question as such could not also be claimed under Section 12 of the Act.
3. In view of these conclusions, we answer the question referred in the negative and against the assessee. The department is entitled to its costs which we assess at Rs. 200.
