1989 (5) TMI 28 - HC - Income Tax

Summary

Issues involved:
1. Depreciation under section 32(1)(ii) of the Income-tax Act for a building.
2. Allowability of expenditure for maintenance under section 37(1) of the Income-tax Act.
3. Expenses hit by section 37(2A) of the Income-tax Act.
4. Disallowance of legal expenses u/s Essential Commodities Act, 1955.

Depreciation Issue:
The court ruled in favor of the assessee based on a previous judgment related to the same assessee. The judgment cited Atlas Cycle Industries Ltd. v. CIT [1982] 134 ITR 458 to support the decision.

Maintenance Expenditure Issue:
The court held that expenditure on entertainment falls under the ambit of entertainment expenditure as per CIT v. Khem Chand Bahadur Chand [1981] 131 ITR 336, and thus, the expenditure was not allowable under section 37(2A) of the Income-tax Act.

Expenses under section 37(2A) Issue:
The court referred to judicial precedents and held that legal expenses incurred in connection with criminal litigation can be allowed as a permissible deduction if incurred to protect the good name of the business and wholly and exclusively for the purpose of the business. The judgment cited various cases in favor of the assessee to support this decision.

Legal Expenses Issue:
The court compared the judgments in CIT v. H. Hirjee [1963] 23 ITR 427 and CIT v. Dhanrajgirji Raja Narasingirji [1973] 91 ITR 544 and concluded that the expenses incurred in connection with criminal litigation were allowable deductions if incurred in the ordinary course of business to protect the business's good name. The decision was based on the test laid down in Dhanrajgirji Raja Narasingirji's case, thus ruling in favor of the assessee and against the Revenue.

The reference was disposed of accordingly with no order as to costs.