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Issues involved:
The judgment involves two main issues: 1. Whether the litigation expense and premium amount claimed by the assessee were permissible deductions under the Income-tax Act, 1961. Issue 1 - Litigation Expense: The case involved an agreement of sale between the assessee and Rampiaribai for a property under litigation. The assessee incurred litigation expenses of Rs. 16,050 for defending its title to the estate. The Income Tax Officer (ITO) rejected the claim, stating the assessee was not a dealer in land and had not acquired any property. The Appellate Assistant Commissioner (AAC) considered the expenses as capital in nature, disallowing the deduction. The Tribunal held that the transaction was an adventure in the nature of trade, but the litigation expenses were not allowable as revenue expenditure. The Tribunal reasoned that the expenses would form part of the title cost if and when the land was acquired. The High Court upheld the Tribunal's decision, stating the expenses were not incurred to protect any asset as the land was not yet acquired by the assessee. Issue 2 - Premium Amount: The premium amount of Rs. 1,152 was paid by the company for insurance covering risks in traveling for one of its directors. The Tribunal disallowed this deduction, noting that the insurance proposal was submitted by the director himself and there was no binding obligation on the company to provide such insurance. The High Court agreed with the Tribunal, stating that the expenses were not incurred wholly and exclusively for the business purposes of the company. In conclusion, both questions were answered in the negative and against the assessee, who was directed to pay the costs of the reference.
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