TMI Blog1989 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, on the facts and in the circumstances of the case, the Tribunal has been justified in law in holding that the payment of Rs. 50,000 made to Bomas Ltd. did not bring into existence an advantage of enduring nature and did not constitute an expenditure of capital nature ?" In this case, the assessment year involved is 1963-64 for which the relevant accounting period is the year ended on December 31, 1962. So far as the first question is concerned, the issue relates to an item of Rs. 12,365 which was disallowed by the Income-tax Officer on the ground that it did not represent expenditure wholly and exclusively incurred for the purpose of the business. The employees' union had filed a suit against the auditor of the company for certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an officer to include an auditor for the purpose of certain sections of the Companies Act. One of such sections was section 633 of the said Act which dealt with any proceedings for default, breach of duty, negligence, etc., against any officer of the company. Considering the provisions of section 633 and section 2(3) of the Cornpanies Act, the Tribunal was of the view that the expenditure was bona fide incurred in the larger interests of the assessee's business, especially in view of the indemnity clause in the articles of association of the assesseecompany. Reference was made also by the Tribunal in this connection to the decision of the Punjab High Court in the case of J. N. Singh and Co. (P.) Ltd. v. CIT [1966] 60 ITR 732. The first qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration of the Supreme Court. That case related to both the civil and criminal proceedings. The criminal proceeding was about misappropriation of the company's funds as well as other fraudulent acts on the part of one Ramgopal Ganpatrai while managing the company. The assessee-company employed its own lawyers to prosecute the case. The prosecution culminated in the conviction of Ramgopal Ganpatrai. The Supreme Court held that the expenditure incurred by the company for the criminal and civil litigations was allowable. It was observed by the Supreme Court that (at p. 550) : ". . . It was for the assessee to decide how best to protect his own interest. It was the duty of the assessee to see that the prosecution was properly conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as expenditure incurred in the course of carrying on of the business of the company, because that will be contrary to public policy. But in so far as the expenses incurred in defending the accused persons in respect of the acts alleged to have been committed by them in the course of employment of the assessee while carrying on the business of the assessee were concerned, unless it could be said that the expenditure was not incurred bona fide, in the interest of the company, the expenditure should be allowed in computing the total income of the assessee. It was held in that case that the expenditure was allowable. One of the persons who were involved in that case was only an agent of the company. In the premises, question No. 1 mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who read a newspaper in a particular year may cease to read it in the very next year. The market survey gives information about the circulation of the newspaper at a given point of time. No evidence was laid to show that the readership will remain constant over a larger number of years. Mr. Mitra has not shown how the assessee will derive any enduring benefit from the market survey. The expenditure incurred was incidental to the carrying on of the business. There is no doubt that the knowledge derived from the market survey will help the assessee to earn larger profits. But, in the facts of this case, this expenditure cannot be said to have brought into existence anything of enduring benefit to the assessee in the sense a capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X
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