TMI Blog1961 (9) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the services of the income-tax consultant to whom the said sum of ₹ 8,250 was paid as fees, were engaged by the assessee in the year 1950 in respect of the assessment years 1944-45 and 1945-46 for which the assessments had already been concluded as also in respect of the assessment years 1946-47, 1947-48 and 1948-49, assessment proceedings in respect of which was then pending before the Income-tax Officer for the preparation of accounts and statements in order to settle the tax liability and to straighten out matters in respect of income concealed from the assessments, which had already concluded and which were about to be reopened as well as from the returns originally submitted in respect of the pending assessments. The deduction claimed was disallowed by the income-tax authorities on the ground that the services of the consultant were required by the assessee in connection with the offer of settlement made by him to the department under what was known as the voluntary disclosure scheme which was not a general feature in completing income-tax assessments in the normal course, and the fees, therefore, could not be claimed as an allowable expenditure. It was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and dismissed the assessee's appeal. On the application made by the assessee under section 66(1) of the Act it drew up a statement and referred to this court the question of law, which we have already set out, as arising out of its decision. Any expense, in order to be deductible as an expenditure under section 10(2)(xv) of the Income-tax Act, must be an expenditure, which is laid out or expended wholly and exclusively for the purposes of the assessee's business, profession or vocation. The question to be considered, therefore, is whether the fees paid by the assessee to the income-tax consultant in the present case can be regarded as expenditure laid out or expended by him wholly and exclusively for the purposes of his business. Now, the expression for the purpose of business has been judicially interpreted in a large number of cases and the meaning that has been given to it is that it means for the purpose of carrying on business, that is, to enable a person to carry on and earn profits in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though he agreed with the view of the majority that the appeal should be dismissed, expressed that his own view was that the expenses should be permitted as an allowable deduction. Now, the view which Viscount Simon was inclined to take was that it was essential for the proper carrying on of a trade that the trader should know what portion of his profits in a given year was left to him after the Revenue had taken its share by taxation. If, therefore, he considered that the Revenue had sought to take too large a share and to leave him with too little, the expenditure which the trader incurred in endeavouring to correct this mistake was a disbursement laid out for the purposes of his trade. According to him, it was an expenditure incurred for the purpose of carrying on and earning profits in the trade, for a reduction in the amount of tax increased the fund in the trader's hands after tax was paid and so promoted the carrying on of the trade and the earning of trading profits. In the event of the assessee's success before the revenue authority, the assessee's tax liability was reduced, but that was only an incidental consequence of the expenses incurred by them. The purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He agreed with the view of the learned Master of the Rolls that the obligation of a trader or assessee to pay the tax was his obligation as a subject and a taxpayer, and in ascertaining the amount of his liability he was putting himself in a position to discharge his duty to the Crown. As a trader his job was to make profits: as a taxpayer it was his duty like that of any other subject to pay taxes. It was as little a part of his trade to find out how much tax be must pay as it was a part to pay it when he had found out. The view expressed by Lord Normand was on the same lines as Lord Porter and Lord Simonds. Mr. Samarth has pressed upon us that we should take the view, which has been taken by Viscount Simon and Lord Oaksey in the case, which we have referred to above. In the first place with very great respect, we find ourselves in agreement with the view taken by the majority in that case. The expenses incurred for the preparation of statements and accounts for tax purposes and the expenses incurred in the engagement of a consultant in satisfying the tax authorities with regard to the said statements and accounts are expenses incurred for the purpose of ascertaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax purposes and for the purpose of satisfying the tax authorities with regard to the correctness thereof could be regarded as expenses laid out for the purpose of the trade, even then on the facts and circumstances of the present case, the expenses claimed by the assessee could not be allowed to him. What we have in the present case is that in respect of the assessment for the assessment years 1944-45 and 1945-46 for which the assessments had been already concluded and in respect of the assessments for the assessment years 1946-47, 1947-48 and 1948-49, which were then pending before the Income-tax Officer, the assessee had concealed his income. In the year 1950, he applied to the income-tax authorities and made an offer that he was prepared to have a just and fair settlement of his income-tax liability on the income which he was prepared to admit as concealed from the assessments already made and also concealed from the returns submitted in respect of the assessments which were then pending before the Income-tax Officer. It was in connection with the settlement so proposed that the services of the consultant were engaged by him and the expenses incurred. These were, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable under section 10(2)(xv) of the Act, the expenses for which the assessee has claimed deduction in the present case are clearly not of that nature but of an entirely different nature. Mr. Samarth has then contended that the proceedings contemplated by the application, which the assessee had made in 1960, were not in any way different from the proceedings under section 34 of the Indian Income-tax Act and the expenses incurred in connection with a reopened assessment under section 34 of the Indian Income-tax Act would be allowable if such expenses are allowed in respect of the original assessment under section 23, as expenses incurred for the purposes of ascertaining the true profits and, therefore, for earning the profits of the business. It is not necessary to deal with this submission in any great detail because the present case is not one of reopening the assessment under section 34 of the Act. It is a case where the assessee, being afraid of his own act of concealment, has gone to the income-tax authorities, made an admission of concealment of income on his part and offered to arrive at a settlement in respect of his tax liability in the hope that he might get the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
