Law:

Section:

JUDGMENT Andley, J.- The Income-tax Appellate Tribunal (Delhi Bench "B") has referred the following two questions to this court under section 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as "the Act": "(1)Whether the sum of Rs. 5,556 is an admissible charge against the income of the previous year? (2)Whether, on the facts and in the circumstances of the case, the sum of Rs. 24,252 is an item taxable in the previous year under the provisions of section 10(2)(vii)?" The assessee is a firm which carries on business as forest contractors and has several branches. The business which the assessee is carrying on was previously being carried on by the Hindu undivided family. The Hindu undivided family was disrupted on March 22, 1956, and on this very date the assessee-firm came into existence. On such disruption, all the assets and liabilities of the Hindu undivided family had been taken over by the assessee-firm as standing in the books of the Hindu undivided family as a running concern. According to the Tribunal "the business was taken over by the assessee-firm as a running concern from the Hindu undivided family." This reference relates to the assessment year 1958-59. We will deal with the first question first. The assessee-firm claimed legal expenses and professional fees aggregating Rs. 5,556 as follows: Rs. "(i) Expenses in connections with the representation to the Central Board of Revenue and other appeal expenses to M/s. P.R. Mehta and Co. 2,483 (ii) Expenses in connection with the settlement of old assessments with the Directorate of Inspection (Investigation) paid to M/s.Khanna and Annadhanan 2,758 (iii) Expenses in connection with the above to shri K.N. Rajagopal Shastri. 315 5,556" The Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal disallowed the deduction which was claimed under section 10(2)(xv) of the Act as being expenditure laid out or expended wholly and exclusively for the purpose of the business of the assessee. On the erroneous ground that the reference in the present case lay to the Allahabad High Court, the Tribunal felt bound to follow the decision of that court in J.K. Cotton Manufacturers Ltd.…

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