9911796707
TMI Blog1973 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the company got into financial difficulties. Hence, the assessee invited the assistance of one Ramgopal Ganpatrai, who agreed to bring in the necessary finance. A tripartite agreement was entered into between the assessee, the company and the said Ramgopal Ganpatrai. Under that agreement it was provided that the assessee should give up the mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies 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 directors of the company. In that suit he also sought to establish his right to the selling agency. Therein, he alleged that the company had in collusion with Ramgopal Ganpatrai sought to oust him from his office of the chairman of the board of directors and further prevented him from getting the selling agency. During the pendency of that sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 the Tribunal's findings is that the assessee incurred the expenditure in question for the purpose of the business. The question for consideration is whether such an expenditure is deductible under section 10(2)(xv). Section 10(1) provides for the assessment of income from business. Section 10(2) provides for certain deductions from that income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 question was incurred for the purpose of business carried on by the assessee, at the same time opined that the entire expenditure incurred should have been given deduction. It advised the Tribunal accordingly. But, at the same time, it asked the Tribunal to re-examine the exact amount expended by the assessee in connection with the criminal litigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 criminal. All that the court has to see is whether the legal expenses were incurred by the assessee in his character as a trader, in other words, whether the transaction in respect of which proceedings are taken arose out of and was incidental to the assessee's business. Further, we have to see whether the expenditure in question was bona fide incur ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
