1. R. JAYASIMHA BABU, J.---We find no substance in these references. The Tribunal has held that there was no infringement of the provisions of section 13(2)(h) read with section 13(4) of the Income Tax Act, 1961, on the basis of the materials placed before it. No error in the muumess Kevenue expenditure-- Indian Income Tax Act, 1961, S.37(1).
2. A plain reading of section 37 of the Income Tax Act, 1961, makes it clear that it is a residuary provision and allows an expenditure, not covered under sections 30 to 36 in computing the income chargeable under the head "Profits and gains of business or profession", on fulfilment of the other requirements, namely, (i) the expenditure should not be in the nature of capital expenditure or personal expenses of the assessee; ,(ii) it should have been laid out or expended wholly and exclusively for the purposes of the business or profession; (iii) it should have been expended in the previous year .
3. The appellant-assessee was a company registered under the Indian Companies Act. It was incorporated in the year 1965. Two companies. Eimco, an American company, and K.C. P. Ltd., an Indian company, promoted the appellant-company. The authorised capital of the appellant was Rs.1,00,000 consisting of 10,00,000 equity shares of Rs.10 each. Each of them agreed to subscribe Rs.4,70,000, out of which each would have to pay initially a sum of Rs.2,80,000 towards its contribution. Towards its share, Eimco contributed technical know-how. It valued the know-how, etc., at a sum of Rs.2,35,000 and-paid the balance in cash as its contribution. The Board of Directors of the appellant allotted equity shares of Rs.2,35,000 being the value of the know-how, to Eimco by,resolution passed on April 29, 1968. In the assessment year 1969-70, the appellant claimed deduction of Rs.2,35,000 as revenue expenditure paid to Eimco towards consideration for supply of technical know-how. The Income-tax Officer treated that amount as a capital expenditure and allowed 1/14th of the said amount as allowable expenditure under section 35A of the Act. The appellant challenged that order before the Appellate Assistant Commissioner on the ground that the whole expenditure ought to have been allowed as revenue expenditure. While so, the Commissioner of Income-tax in exercise of his power under section 263(1) of the Act revised the said order of the Income-tax Officer, dated March 25, 1970, holding that the amount in question could not be treated as expenditure and that granting 1/14th of the said amount as capital expenditure under section 35A was erroneous and prejudicial to the interests of the Revenue and thus set aside the same. Thereafter, the Appellate consideration of materials has been brought to our notice. The Tribunal has held that there was no diversion of the trust's fund by the trustees for the benefit of any person mentioned in section 13(2) of the Act.
4. The assessee is admittedly an educational trust. The fact that the trustees happen to be partners of firms and that they had assigned to the trust irrevocably their share income to the trust would not result in any diversion of fund by the trust to the trustees. On the other hand, the income otherwise receivable by the trustees had the assignment not been effected, after the assignment is received by the trust. There is no question of diversion of the trust's funds for the benefit of the trustee. The. Tribunal has also held so. Moreover, the amounts involved are relatively very small ranging from Rs.728 to the maximum of Rs.3,063 for the assessment years 1973-74 to 1981-82. That the trust receives income from a business is by itself not a ground to deny the benefit of section 10(22) of the Act. In the background of these facts we are satisfied that there are no errors on the part of the Tribunal in holding in favour of the assessee. The questions referred to us namely: "(1) Whether,' on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was no diversion of trust funds by the trustees for the benefit of any person mentioned in section 13(3) of the Income-tax Act and that there was no infringement of the provisions of section 13(2)(h) read with section 13(4) of the Income Tax Act, 1961? And
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to exemption from the levy of wealth tax for the assessm ent years 1973-74 to 1981-82?"
5. Are answered in favour of the assessee against the Revenue. .