TMI Blog1971 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by GROVER J.- These appeals from a judgment of the Calcutta High Court have been brought by certificate under section 66A(2) of the Indian Income-tax Act, 1922, hereinafter called the " Act " and involve a common question, namely, whether the law charges incurred in connection with the proceedings before the Investigation Commission were an allowable deduction in the computation of the profits of the business of the assessee: The facts in the first batch of appeals, i.e., C. As. 1351-1353/68 may be stated. During the assessment years 1952-53, 1953-54 and 1954-55 the assessee, which is a public limited company, spent Rs. 3,810, Rs. 1,42,377 and Rs. 2,42,688 for representing its case before the Investigation Commission relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That Act was enacted for the purpose of ascertaining whether the actual incidence of taxation on income was and had been in recent years in accordance with the provisions of law and the extent to which the existing law and procedure for the assessment and recovery of such taxation was adequate to prevent evasion thereof and to make provision for investigation into such matters. Section 5(1) conferred power on the Central Government to refer particular cases or points to the Commission for investigation and report if the Government was of the opinion that there had been substantial evasion of payment of income-tax in such cases. If in the course of investigation the Commission had reasons to believe that some person other than the one whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of such business, profession or vocation." The expression "for the purpose of the business" is essentially wider than the expression "for the purpose of earning profits". It covers not only the running of the business or its administration but tlso measures for the preservation of the business and protection of its assets and property. It may legitimately comprehend many other acts incidental to the carrying on of the business. In Travancore Titanium Produds Ltd. v. Commissioner of Income-tax, the position relating to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romote the interest of the business. (See Sree Meenakshi Mills Ltd. v. Commissioner of Income tax). The point which has presented some difficulty at least in the English courts is whether the expenditure incurred by the trader in fighting the revenue's assessment can be regarded as an allowable expenditure. In Smith's Potato Estates Ltd. v. Bolland expenses had been incurred in filing an appeal against the decision of the Commissioners of Inland Revenue to the Board of Referees in the matter of certain expenditure which had been claimed by the assessee as an allowable deduction. It was held by the majority (Viscount Simon and Lord Oaksey dissenting) that the expenditure was not an allowable deduction for income-tax and excess profits tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue has relied upon the observations extracted at an earlier stage from the case of Travancore Titanium Products Ltd. and has argued that there must be a direct and intimate connection between the expenditure of the business, i.e., between the expenditure and the character of the assessee as a trader and not as an owner of assets. We are unable to appreciate how these observations which were made in the light of different facts in any way militate against the view of Viscount Simon and Lord Oaksey in Smith's Potato Estates case as also the decision of the Calcutta High Court in Calcutta Landing Shipping Co.'s case. It may be pointed out that in the decision relied upon by the revenue the question was whether the tax imposed under the Weal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which result in more funds being left for the purpose of carrying on the business there is always a possibility of higher profits. To give an illustration, if an assessee can, by an appropriate proceeding, succeed in getting its tax liability for gains and profits reduced by a sum of Rs. 1,00,000 that amount will essentially become available for the purpose of business with a reasonable expectation of more profits. As was observed by Viscount Simon in Smith's Potato Estates case if the trader considers that the revenue seeks 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 is a disbursement laid out for the purposes of his trade. If he succeeds he wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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