SHREE MEENAKSHI MILLS LTD., MADURAI versus COMMISSIONER OF INCOME-TAX, MADRAS

Citation: [1967] 1 S.C.R. 392 · Decided: 19-09-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

SHREE MEENAKSHI MILLS LTD., MADURAI 
A 
\' 
COMMISSIONER OF INCOME-TAX, MADRAS 
September 19, 1966 
(J. c. SHAH Al\D v. Bl!ARGAVA, JJ.] 
Income-tax Act, 1922 (II of 1922), •· 10(2)(xv)-Expendlturc tn-
-cun-ed for proceedings ·to prevent enforcement of order interfering with 
buslMss-lf admissible deduction. 
The assessee-mill claimed deduction under s. 10(2) (xv) of the Indian 
lllcomo-tax Act of the expemm incurred by It and tho costs awarded ID 
Government in respect of unsuccessful writ petition and appeals 
there-
from. 
The deduction was disallowed by the depanmental authorities, and 
tho question was answered against tho asaessce by tho High Court. 
ID 
appeals to this Court 
HEID : Tiie appeal must be allowed. 
The proceeding started by the as.,cssee \Vas in relation 10 the busines5 
of the assessee. 
Bxpcnditure incurred to resist in a civil proceeding 
the enforcement 
of a measur&--legislative or executive, which imposes restriction• on tho 
Q.rrying on of a business Qr to obtain a declarat100 
that the mea;urc is 
invalid 
would. if other conditions are •atmied, be 
admissible under a. 
10(2) (xv) as a permissible deduction In the computation of taxable Income, 
even thoush the expenditure does not direcUy 
relate to the earning of 
income. Expenditure may not be denied admission as a permissible deduc· 
tion in computing the taxable income merely because the proceeding has 
failed. 
Pe,..istencc of the assessee in launchmg the proceeding and call"f· 
Ing it from Coun to Court and Incurring expeoditure for that purpoee 
again cannot be a ground far disallowing the claim. 
(396 B-C; 399 BJ 
Comml.nloner of Income-tax, Wat Bengal v. ff. Hlrjee 23 l.T.ll. 417, 
Morgan (Inspector of Taxes) v. Tat• de Lyle Ltd. 26 1.T.R. 195 : 35 T.C. 
367 and Commissioner of Incom•-tax, Kuala v. Malaya/am 
Plantatlom 
Lid., [196 HJ 7 S.C.R. 693, referred to. 
OvrL Al'PELLATF. JURISDICTION: Civil Appeals Nos. 557 & 558 
()r 1965, 
Appeal by special leave from the judgment and order dated 
September 19, 1962 of the High Court or Judicature at Madras (in 
ll 
c 
D 
E 
F 
Tax Case No. 87 of 1960), 
G 
R. Ganapatlzy Iyer, for the appellant. 
R. M. Jfazarnal'is and R. N. Sachthey, for the respondent. 
The Judgment of the Courl was delivered by 
Shah, J.-Srec Meenakshi Mills Ltd.-a company incorporated 
under the Indian Companies Act with its registered office at Madurai 
<:arrics on business of cotton spinning and weaving. In the premises 
or the factory of the Company there are initalled 80 handlooms 
H 
A 
B 
c 
D 
E 
F 
G 
H 
MEENAKSHI MILLS v. Ccl.T. (Shah, J.) 
393 
These h.andlooms were found inadequate to weave the yarn pro-
duced 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 cl. 18-B of the Cotton Cloth 
and Yam (Control), Order, ·1945, issued bythe 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 descrip-
tion 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 exeept 
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 18-A of the said 
order, to any dealer in yam not engaged in the production of cloth 
on handlooms or powerlooms". The Company addressed a letter 
on February 13, 1946 to the Textile Commissioner submitting that 
the 
prohibition in general terms was ultra vires the authority 
conferred by the Cotton Cloth and Yarn (Control) Order. The 
Company 
continued notwithstanding the prohibition to deliver 
yarn to weavers and did so till February 20, 1946. This yam 
was seized under the orders of the Textile Commissioner. On 
February 20, 1946, the Provincial Textile Commissioner, purporting 
to act in exercise of authority conferred upon him by a notification 
issued by the Government of India, issued an order addressed to 
the Company that: 
"You should accordingly confine your delivery to the categories 
of persons notified below:-
(a) Licensed yarn dealers (in accordance with the said 18-A 
of the Control Orde

Excerpt shown. Read the full judgment & AI analysis in Lexace.