TMI Blog1966 (9) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and weaving. In the premises of the factory of the company there are installed 80 handlooms. These handlooms were found inadequate to weave the yarn produced by the factory and a part of the yarn produced was distributed to weavers outside the factory who were engaged by the company to weave the yarn into cloth. Under clause 18B of the Cotton Cloth and Yarn (Control) Order, 1945, issued by the Government of India, the Textile Commissioner was authorized to direct any manufacturer or dealer or any class of manufacturers or dealers, inter alia, not to sell or deliver any yarn or cloth of specified description except to such person or persons and subject to such conditions as the Textile Commissioner may specify. On February 7, 1946, the Textile Commissioner issued an order directing the company not to sell or deliver any yarn manufactured by the company except to such person or persons as the Textile Commissioner may specify. It was recited in the order that " nothing in this Order shall apply to a sale or delivery made, in pursuance of clause 18A of the said order, to any dealer in yarn not engaged in the production of cloth on handlooms or powerlooms ". The company addressed a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed the appeal filed by the company. They held, agreeing with the High Court, that the expression " deliver " in clause 18B, sub-clause 1(b), of the Cotton Cloth and Yarn (Control) Order, 1945, is used in its ordinary broad sense of handing over possession, as distinct from passing of property, and would include delivery of possession to a bailee. Accordingly, delivery of part of its yarn by the company to owners of handlooms outside the mill premises for conversion of the yarn into cloth for the company was in contravention of the order made under clause 18B, sub-clause 1(b). The Judicial Committee also held that a petition under section 45 of the Specific Relief Act, 1877, directing the Provincial Textile Commissioner to desist from seizing the yarn supplied to the weavers and to restore to the company the yarn already seized was incompetent as the acts in respect of which relief was asked for took place outside the limits of the ordinary original civil jurisdiction of the High Court. The company spent Rs. 20,035 in prosecuting the proceedings under section 45 of the Specific Relief Act and had also to pay Rs. 5,912 as costs to the Government of the unsuccessful appeal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the High Court had no jurisdiction to entertain the petition, and also because the expression " deliver " used in clause 18B of the Control Order included handing over of yarn to the weavers outside the premises of the factory for conversion into cloth. But expenditure incurred in prosecuting a civil proceeding relating to the business of an assessee is admissible as expenditure laid out wholly and exclusively for the purpose of the business even if the proceeding is decided against the assessee. It was held by this court in Commissioner of Income-tax v. H. Hirjee that the deductibility of expenditure under section 10(2)(xv) must depend on the nature and purpose of the legal proceeding in relation to the business whose profits are under computation and cannot be affected by the final outcome of that proceeding. The proceeding started by the company was in relation to the business of the company. The company was thereby seeking relief against interference by the executive authorities in the conduct of its business in the manner in which it was being carried on previously. It was also seeking to obtain an order for restoration of its goods which were seized. It may be granted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner in which it was accustomed to do was unauthorized and to prevent enforcement of that order : thereby the company was seeking to obtain an order from the court enabling the business to be carried on without interference. Expenditure incurred in that behalf would without doubt be expenditure laid out wholly and exclusively for the purpose of the business of the company. It was argued however that the yarn delivered by the company to the weavers contrary to the prohibitory order dated February 20, 1946, was attached under the order of the Provincial Textile Commissioner, and since the company violated the prohibitory order, the primary object of the petition for mandamus instituted by the company was to secure protection against prosecution of the company and an order for return of the goods in respect of which an offence was committed. Expenditure incurred in prosecuting that claim was, it was said, not laid out wholly and exclusively for the purpose of the business. Reliance was placed upon the judgment of this court in H. Hirjee's case in which it was held that a person who was prosecuted for an offence under section 13 of the Hoarding and Profiteering Ordinance, 1943, on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be decided not on what was found or observed by the High Court in appeal from order in the proceedings under section 45 of the Specific Relief Act or by the Judicial Committee, but upon findings of fact recorded by the Tribunal. It is unfortunate that the High Court took the facts not from the statement of the case, but apparently from the judgment of the Judicial Committee. The High Court assumed that the company had contravened the law because it delivered yarn to weavers in contravention of the order dated February 20, 1946. But the assumption on which the discussion is founded is erroneous. The High court also thought that expenditure to fall within the terms of section 10(2)(xv) must be one for the purpose of earning income, and there was no material on the record to show that the expenditure was so incurred. If it is intended thereby to imply that the primary motive in incurring the expenditure admissible to deduction under section 10(2)(xv) must be directly to earn income thereby, we are with respect unable to agree with that view. This court in Commissioner of Income-tax v. Malayalam Plantations Ltd. observed : " The expression 'for the purpose of the business' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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