TMI Blog1997 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court the following questions of law for answer : "Question No. 1.---Whether the Tribunal is right in law and had any material before it to hold in para. 7 that in the instant case there is absolutely no evidence about the factum of payments of the alleged tips to the policeman, etc., and deduction claimed at Rs. 76,365 and Rs. 68,087 for the assessment years 1986-87 and 1987-88, respectively, on payments of tips to policemen, etc., on way side by drivers while driving their vehicles is not an admissible expenditure under section 37(1) of the Income-tax Act, 1961? Question No. 2.---Whether, on the facts and in the circumstances of this case, expenditure incurred by the assessee on payments of tips to policemen, etc., on way si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deducted as the same is not lawful. While rejecting the application for reference to the court, the learned Tribunal further held that the act of greasing the hands of Government employees is in contravention of the Indian Penal Code and amounts to infraction of law besides being opposed to public policy. The findings are pure findings of fact based on appreciation of evidence available on record and, therefore, the prayer of the applicant for reference was rejected. Hence, this application under section 256(2) of the Act seeking reference as above. The facts giving rise to I. T. R. No. 46 of 1997 are similar and the same points of fact and law involved, as such, both the references are referred together and are being decided together. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 395 and a Supreme Court decision in CIT v. Greaves Cotton and Co. Ltd. [1968] 68 ITR 200. On perusal of the orders it is evident that the Assessing Officer has found that such expenditures are not verifiable. Even otherwise common experience goes to show that no person accepting illegal gratification would pass a receipt which may be used as evidence against him and, therefore, such expenditure can never be verified. The businessman can show any amount of expenditure on this count. The contention of learned counsel for the applicant that for a smooth running of the business the applicants-assessees are required to pay tips and grease the hands of R. T. O. staff and, therefore, that should be treated to be an expenditure under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, thus : "(i) that, though generally the onus of proving that the expenditure had been actually incurred for and in the course of the business for earning income therefrom is undoubtedly on the assessee, in the instant case, the Tribunal was not wrong in its view that, in the very nature of the expenditure, there could not be any documentary evidence to prove it." But, these expenditures were incurred by way of tips to their drivers and employees. The Division Bench of the Madras High Court affirmed and accepted illegal and improper expenditure as allowable deduction. We are unable to subscribe to this view. This should be wholly against the public policy. In such cases the High Court is not working as a court of appeal. It is not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in contravention of law or which are opposed to public policy. Infraction of law is not a normal incident of the business. Similarly, payments which are opposed to public policy being in the nature of unlawful consideration for discharging an official duty otherwise than according to law, i.e., otherwise than on merits, cannot equally be recognised. It would be shortsighted to hold that businessmen are entitled to conduct their business even contrary to law and claim deductions of payments as business expenditure, notwithstanding that such payments are illegal or opposed to public policy, or have pernicious consequences to the nation's life as a whole. Section 23 of the Contract Act equates an agreement or contract opposed to public policy, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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