TMI Blog1973 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... . They arise from a reference under section 66(1) of the Indian Income-tax Act, 1922. In order to properly appreciate the decision of the High Court, it would be convenient to set out the material facts at the very outset. The assessee, an individual, derived during the accounting years ending on October 21, 1949, and November 9, 1950 the relevant assessment years being 1950-51 and 1951-52--considerable income from various sources in Hyderabad as well as in other places. In 1935, the assessee had promoted a public limited company called "Dhanraj Mills Ltd." at Bombay. The assessee was appointed as its managing agent for a period of 50 years. He was also appointed as a permanent director and chairman of the board of directors. In 1937, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing agency respectively to those two companies. The assessee's consent thereto was also obtained, as stipulated in the agreement. In 1946, Ramgopal Ganaptrai moved a resolution for the removal of the assessee as the chairman of the board of directors of the company on the ground that he had committed offences under section 86F of the Indian Companies Act. That resolution was accepted and the assessee was removed from his office of the of the board of directors. In 1947 the selling agency was surrendered by the private company floated by Ganpatrai, but it did not revert to the assessee as provided in the original tripartite agreement. The assessee, thereupon, instituted a civil suit seeking his reinstatement as the chairman of the board of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant previous years were claimed by him as allowable deductions under section 10(2)(xv). We are not now concerned with the amount spent for the civil litigation. That has been given deduction. So far as the amount spent for criminal litigation is concerned, the Tribunal came to the conclusion that in the assessment year 1949-50, the assessee had spent a sum of Rs. 9,836 and during the assessment year 1950-51, he had spent a sum of Rs. 39,657 and further in the assessment year 1951-52, he had spent a sum of Rs. 57,066. It further came to the conclusion that the assessee expended all these amounts for the purpose of the business. The Tribunal opined that the criminal case was instrumental in bringing about the compromise. The effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplain against that finding. At the instance of the Commissioner of Income-tax, the Tribunal submitted the following two questions to the High Court : " (1) Whether, on the facts and in the circumstances of the case, any part of the expenditure incurred by the assessee in connection with the criminal proceedings initiated and conducted by the Government against Shri Ramgopal Ganpatrai was an allowable deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922 ? and (2) If the answer to question No. 1 is in the affirmative, whether there is any basis for estimating such allowable part of expenditure at one-third of the total ? The High Court, while accepting the conclusion reached by the Tribunal that the expenditure in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a criminal case cannot be considered as an expenditure coming within the scope of section 10(2)(xv) of the Act. He contended that an expenditure incurred in connection with a civil litigation can be given deduction to, if the conditions prescribed in section 10(2)(xv) are satisfied, but no such deduction can be given if any expenditure is incurred in connection with a criminal case. We find no support for this contention from the language of section 10(2)(xv). That provision does not make any distinction between civil litigation and criminal litigation. In fact, expenses incurred in connection with litigation are not separately dealt with under that provision. In our opinion, it makes no difference whether the proceedings are civil or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protect his own interest. It was the duty of the assessee to see the the prosecution was properly conducted. He was interested in successfully prosecuting the case. The fact that he did not leave the carriage of the case in the hands of the prosecuting agency of the Government is no ground for disallowing the expenditure. It is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best. So far as the apportionment is concerned we are not told why we should not consider the same as a reasonable estimate. For the reasons mentioned above, we vacate the order made by the High Court and in its place we answer the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
