1970 (11) TMI 24 - HC - Income Tax

Amount given as fees to advocate for conducting writ petition - held that such expenditure is allowable expenditure as it was incurred wholly for business - further amount spend for replacement of petrol engines by diesel engines in buses is also held as revenue expenditure

Summary

Issues:
1. Deductibility of advocate fees as business expense under section 10(2)(xv) of the Indian Income-tax Act, 1922.
2. Allowability of expenditure on replacement of petrol engines by diesel engines under section 10(2)(v) of the Act.

Analysis:

Issue 1: Deductibility of advocate fees
The case involved the deductibility of advocate fees paid by the assessee for challenging the transfer of its income-tax case. The court analyzed the expenditure under section 10(2)(xv) of the Act, emphasizing commercial expediency and the necessity for facilitating business activities. Referring to precedents from the Madhya Pradesh and Calcutta High Courts, the court held that the advocate fees were incurred wholly and exclusively for business purposes, making them an allowable deduction. The court noted an inconsistency in disallowing certain fees while allowing others related to the same writ petition, highlighting the need for consistent treatment of similar expenses.

Issue 2: Allowability of engine replacement expenditure
The second issue revolved around the deductibility of Rs. 35,895 spent on replacing petrol engines with diesel engines. The court examined conflicting judgments from the Mysore and Andhra Pradesh High Courts regarding the nature of such expenditure. By citing relevant case law and principles, the court concluded that the expenditure qualified as current repairs under section 10(2)(v) of the Act. Drawing parallels with similar cases from the Madras and Punjab & Haryana High Courts, the court affirmed the allowability of the expenditure.

In conclusion, the court ruled in favor of the assessee-company on both issues, allowing the advocate fees and the engine replacement expenditure as business expenses under the specified sections of the Income-tax Act. The judgment provided detailed reasoning based on legal precedents and interpretations of relevant provisions, ensuring a comprehensive analysis of the issues at hand.