COMMISSIONER OF INCOME-TAX, WEST BENGAL versus H. HIRJEE

Citation: [1953] 1 S.C.R. 714 · Decided: 17-04-1953 · Supreme Court of India · Bench: M. PATANJALI SASTRI · Disposal: Appeal(s) allowed

Judgment (excerpt)

1958 
April 17. 
• 
714 
SUPREME COURT REPORTS 
(1953] 
COMMISSIONER OF INCOME-TAX, 
WEST BENGAL 
v. 
H. HIRJEE. 
[PATAN.JALI SASTRI C.J., MUKHEHJEA, s. R. DAS 
and GHULAM HASAN JJ.] 
Indian Income-tax Act (XI of 1922), s. 10 (2) (xv)-Business 
expenditure-Expenses incurred IYy businessman in defending 
against criminal prosectltion for offence under Hoarding and Pro-
fiteering Act-Finding of fact-When final. 
The respondent who c""ried on business was prosecuted under 
s. 13 of the Hoarding and Profiteering Ordinance of 1943 on a 
charge of selling goods at an unreasonable price. 
He was finally 
acquitted and claimed in his assessment for a subsequent year 
that the suni of Rs. 10,895 which he had spent in defending him-
self against the charge should be deducted from his income under 
s. 10(2)(xv) of the Income-tax Act as "expenditure laid out or ex-
pended wholly and exclusively for purposes of the business". The 
Appellate •rribunal held that in the absence of any evidence that 
personal liberty was likely to be jeopardised there was only a 
chance of his being fined, that the object of saving himself from 
fine was so inext~icably mixed with the main purpose of the 
defence which was solely for the purpose of maintaining the res-
pondent's name as a good bu3inessman a.nd also to save his stock 
from being undersold, that it could be ignored, and that, there-
fore, the claim was allowabb under s. 10(2)(xv). 
On a reference 
the High Court held that tl:te finding of the Tribunal was one of 
fact and was binding on it. On further appe0,l: 
Held (i) that the 
finding of the Tribunal was not one of fact and was not decisive of 
the reference; (ii) the finding of the Tribunal was vitiated by its 
refusal to consider the possibility of the prosecution ending in a 
sentence of imprisonment ancl throwing on the Income-tax autho-
rities the burden to prove that the prosecution might result in his 
imprisonment ; and the finding was not therefore binding on the 
Court; (iii) in any event, the expenses could not be said to be 
"expenditure laid out or expended wholly and exclusively for the 
purposes of the business" withins. 10(2)(xv) of the Act. 
Legal expenses incurred in civil litigation arising out of 
matters incidental to the carrying on of a business stand an a 
different :footing as in such a case no question could arise as to the 
primar.y or secondary purpose for which the expenses could be 
said to have been incurred. 
The deductibility of such expenses under s. 10 (2) (xv) must 
depend on the nature and purpose of the legal proceeding and not 
.. 
S.C.R. 
SUPREME COURT REPORTS 
715 
on the final outcome of it and a distinction cannot therefore be 
drawn between expenses of a successful and unsuccessful defence 
1958 
for purposes of s. 10 (2) (xv). 
Commissioner of 
J.B. Advani v. Commissioner of Income-tax ([1950] 18 I.T.R· 
557) referred to. Commissioner of Income-tax v. Maharajadhirnj 
of Darbhanga ([1942] L. R. 69 I.A. 15) distinguished. 
CIVIL APPELLH'E JURISDICTION: 
Civil Appeal 
No. 75 of 1952. 
Appeal from the Judgment ·aud Order dated the 
16th January, 1951, of the High Court of Judicature 
at Calcutta (Harries C.J. and Banerjee J.) in Income-
tax Reference No. 46 of 1950. 
C. K. Daphtary, Solicitor-General for India (G. N. 
Joshi, with him) for the appellant. 
N. C. Chatterjee (P. K. Sen Gupta, with him) for 
the respondent. 
1953. 
April 17. 
The Judgment of the Court was 
delivered by 
PATANJALI SAsTRI C.J.-This is an appeal from a 
judgment of the High Court of Judicature at Cal-
cutta answering a reference under section 66-A of the 
Indian Income-tax Act, 1922 (hereinafter referred to 
as the Act) in favour of the respondent herein. 
The respondent carries on business as selling agents 
of the Bengal Potteries Ltd., and he was prosecuted 
under section 13 of the Hoarding and Profiteering 
Ordinance, 1943, (Ordinance No. XXXV of 1943) on a 
charge of selling goods at prices higher than were 
reasonable in contravention of the provisions of sec-
tion 6 thereof .. It appears that before the prosecution 
was launched in August, 1944, respondent's business 
premises were searched and a part of his stock was 
seized and taken away. The respondent defended the 
case, spending a sum of Rs. 10,895, and the prosecu-
tion ended in an acquittal on February 16, 1945. In 
bis assessment to income-tax for the year 1945-46, 
the respondent claimed the deduction of the said sum 
of Rs. 10,895 from the profits o

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