Law:

Section:

Income-tax---Capital or revenue expenditure--Assessee having taken over business of another company paid legal/litigation charges over a dispute on payment of compensation--Assessee, having acquired a capital asset and compensation paid in regard to such acquisition also being a capital expenditure, expenditure incurred on litigation in that behalf, held, were capital expenditure. Life Insurance Corporation of India v. C I T (1979) 119 I T R 900 ref. JUDGMENT S.P.BHARUCHA, J.--Three questions are referred in this reference at the instance of the assessee under Section 256) of the Income Tax Act. Counsel are agreed that the answer to the first question is governed by the decision of this Court in the assessee's own case in Life Insurance Corporation of India v. C I T [1979] 119 I T R 900, and that the expenditure is deductible. Counsel are agreed that the answers to be given to question Nos.3(i) and 3(ii) are governed by the decision of this Court in the aforesaid matter and that these questions must be answered in the negative and in favour of the Revenue. Question No.l and questions Nos.3(i) and 3(ii) are answered accordingly. Question No.2 reads thus: "Whether, on the facts and in the circumstances of the case, the sums of Rs.78,712 being the amount paid during the intervaluation period ended December 31, 1959 for the assessment years 1960-61 and 1961-62 and Rs.42,022 paid during the intervaluation period ended December 31, 1961, for the assessment year 1962-63, respectively, as legal charges incurred to meet the erst while insurers' claim for compensation to the extent that such claim was considered by the assessee to be in excess of the amount payable under Section 16 of the Life Insurance Corporation Act, 1956, m accordance with the principles contained in the First Schedule to the said Act was not an expenditure deductible under section (sic) of the Indian Income Tax Act, 1922, Sections 30 to 43 of the Income Tax Act, 1961?" The assessee took over…

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