HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Dharamvir Dhir v. Commissioner of Income-tax, Bihar and Orissa
Civil Appeals Nos. 448 and 449 of 1959
[1961] 3 SCR 359 ·
Indian Income-tax Act, 1922: sections 10(2)(iii), 10(2)(xv) and 66(2)
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by J. L. Kapur, J. · J. L. Kapur, J. · M. Hidayatullah, J. · J. C. Shah, J.
Assessment years: 1947-48, 1948-49
01 · Facts of the case
To perform a coal-raising contract, the comparatively small-means assessee obtained unsecured finance up to Rs.1.5 lakh from a charitable trust in exchange for interest plus 11/16 of net business profits. The profit-linked payments for two years were disallowed below (SCR pp.360-364; PDF pp.2-6).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The genuine contract and commercial circumstances controlled, not accounting labels or payment size. An antecedent obligation enabling profit earning differed from division of profits after ascertainment. No better finance was shown available, and commercial expediency supported deduction (SCR pp.363-370; PDF pp.5-12).
Source: Primary judgment: discussion
03 · Judicial decision
Both appeals were allowed; the High Court orders set aside and the questions answered for the assessee with costs in both courts, one hearing fee (SCR pp.370-371; PDF pp.12-13).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the assessee on the profit-linked financing deductions (SCR pp.370-371; PDF pp.12-13).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: determine commercial character from the genuine financing agreement, security, alternatives, lender exposure and whether the obligation preceded and enabled profit earning. The fact-bound result does not make every profit-sharing or related-party payment deductible.
Source: Primary judgment: review point
Source & verification
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Full 13-page SCR asset read and visually inspected; the following report fragment on physical p.13 was excluded.
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Statutory scope
Historical 1922 Act commercial-expediency ruling; no present transfer-pricing, anti-avoidance or current-law clearance.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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