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Issues Involved:
1. Whether the expenses incurred by the assessee are an admissible deduction under Section 10(2)(xv) of the Indian Income-tax Act. Detailed Analysis: Issue 1: Admissibility of Expenses as Deduction under Section 10(2)(xv) The primary issue revolves around whether the litigation expenses incurred by the assessee can be considered an admissible deduction under Section 10(2)(xv) of the Indian Income-tax Act. The relevant facts are as follows: The assessee, a joint Hindu family firm engaged in cloth merchandising and money-lending, entered into an agreement to promote a limited company, Shahdara Delhi Iron Works Ltd., contributing Rs. 15,000 to its capital. The business commenced in August 1939 but the company was never floated. Subsequent litigation ensued when the assessee sought dissolution of the partnership and rendition of accounts, leading to a preliminary decree in 1944 which was set aside by the High Court in 1945. The assessee claimed Rs. 4,723 as litigation expenses during the 1945-46 assessment year, which was disallowed by the Income-tax Officer on the grounds that it was capital expenditure, not related to the earning of profit for the accounting year. The court examined Section 10 of the Indian Income-tax Act, emphasizing that allowable expenditures must be incurred "wholly and exclusively for the purposes of such business" and not be of a capital or personal nature. The court noted that the assessee's business was limited to cloth merchandising and money-lending, with no extension into the iron works business. The court also highlighted that each business must be considered separately unless they are interlocked or dependent on each other. The court referenced the case of South Indian Industrials Ltd. v. Commissioner of Income-tax, Madras, which elucidated that a company can carry on separate businesses, and expenditures for one cannot be allowed in computing profits of another unless they are interlocked. The court also cited Commissioner of Income-tax, Bengal v. Shaw Wallace and Company, which held that taxable income must arise from a business carried on during the accounting period. The court concluded that since the partnership business was not carried on during the accounting period and the litigation expenses were incurred for terminating the business, they could not be considered as laid out or expended wholly and exclusively for the purpose of the business. The court also dismissed the argument that the expenses were for making good the title to property acquired as an investment from the money-lending business. The court found no reasonable ground to hold that the Tribunal erred in its factual finding that the expenditure was not laid out or expended wholly and exclusively for the purpose of the business. Consequently, the court held that no question of law arose from the Tribunal's judgment and dismissed the petition, leaving the parties to bear their own costs.
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