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TMI Blog1970 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... d settled in Pakistan. Some inquiries were made by the Deputy Custodian of Evacuee Property, Bombay, in respect of Hoosein and Alimahomed, and, thereafter, on the 4th of August, 1949, Aboobaker expelled Hoosein and Alimahomed from the partnership firm in pursuance of the provision contained in clause 13 of the partnership deed. The business was thereafter continued by Aboobaker and the assessee as the remaining partners. The shares of Hoosein and Alimahomed were thereafter declared to be evacuee properties. In December, 1949, proceedings under the Administration of Evacuee Property Act, 1950 (hereinafter referred to as " the said Act "), were started against Aboobaker. The Additional Custodian of Evacuee Property made an order dated the 2nd February, 1950, holding that Aboobaker was not an evacuee, but was an intending evacuee. Against that order an appeal, as also a revision petition, were filed before the Custodian-General of Evacuee Property. In the meantime, Aboobaker died on 14th May, 1950. Aboobaker left him surviving his said three sons and a daughter, Hawabai. The shares of the two sons in the partnership business had vested in the Custodian of Evacuee Property as stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an appeal to the Supreme Court. Finally, the Custodian-General by his order, dated the 1st October, 1960, held that the assessee's properties were not evacuee properties. These proceedings will hereafter be referred to as " the third set of proceedings ". In respect of the above three sets of proceedings the applicant incurred considerable legal expenses and he claimed the same as a deduction under section 10(2)(xv) on the ground that it was a business expenditure in respect of the assessment years 1952-53 to 1954-55 and 1955-56 to 1957-58. The claim of the assessee in respect of the first set of proceedings was confined to the expenses incurred by the assessee after the death of Aboobaker. In respect of that claim for deduction the Income-tax Tribunal has finally disallowed the claim holding that primarily the provisions of the said Act apply to the acts of the person, the result whereof is that the property mentioned in the said Act becomes and is declared to be an evacuee property and that the expenditure by way of legal costs had been incurred by the assessee for the protection of his person and not for the protection of his properties or his said business. It is, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to act as the landlord and owner of the cinema building gave the said notice to the assessee in the latter's capacity of a lessee, as by that time the assessee had become the sole proprietor of the business of exhibiting pictures in the Imperial Cinema. It is quite clear that, although the person giving the said notice was the Custodian of Evacuee Property, he was, in giving that notice, acting like any other landlord attempting to terminate his lessee's lease. The parties were arrayed in the second set of proceedings as a landlord and a tenant and the subject-matter of the dispute did not relate to any question arising under or in respect of the said Act. The Tribunal has obviously lost sight of this aspect of the second set of proceedings. The principle on which the Tribunal has disposed of the appeal before it was mainly that the proceedings under the said Act were against the person and not the property of the assessee and that principle had, obviously, no application to the second set of proceedings. The Tribunal's judgment in respect of the second set of proceedings is, therefore, obviously wrong and the question, in so far as it relates to the second set of proceedings, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been incurred by the assessee in the course of his business. He contended that section 2(d) of the said Act defines " evacuee " and the definition contained in the various clauses thereunder clearly shows that in any proceedings for declaring a particular property to be an evacuee property the necessary and main issue would be whether the person concerned is an evacuee and that the other issue as to whether that particular property belongs to him or not would be a very minor issue. He further contended that rules 6 and 7 of the Administration of Evacuee Property (Central) Rules and Form No. 1 prescribed under them for the notice required to be given by section 7 show that what the evacuee is called upon to show cause against is the particular facts alleged against him contemplated by section 2(d), which acts are his personal acts. He pointed out that, for example, clause (i) of section 2(d) refers to an act of the person leaving India, clause (ii) refers to an act of a person residing in Pakistan, and clause (iii) refers to an act of a person of obtaining property in Pakistan. He contended that these are all his personal acts and, moreover, acts which are voluntarily done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition contained in section 2(d), however, is to ascertain which person is an evacuee. But there the function of section 2(d) comes to an end. Subsequent sections of the said Act show that the Act applies only to the property of an evacuee after it is established that he is an evacuee as defined by section 2(d). The said Act does not contain any provision whatever for a formal declaration that a person is an evacuee. Section 7, however, does provide for a formal declaration by way of a notification that a particular property or properties is or are an evacuee property or evacuee properties. As the determination whether a person is an evacuee has to precede declaring his property to be evacuee property, section 7 naturally provides that where the Custodian is of opinion that any property is an evacuee property, he should first serve a notice as prescribed by the said rules to the persons interested, that he should thereafter hold an inquiry and that he should thereafter pass an order declaring any such property to be evacuee property. The rules as well as the form prescribed by the said rules for giving such notice require that the property must be specifically mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings is in Ebrahim Aboobaker v. Tek Chand and Mr. Joshi relied upon some observations therein and contended that after the Supreme Court considered the scheme of the said Act it reached the conclusion, as shown by certain observations in the judgment, that it was the person of the evacuee which was concerned in the proceedings under the said Act. For example, he relied upon the words appearing at page 10 of the report, " . . . the object of section 7 was to take proceedings against a living person . . . . ". Now it is true that the words " living person " and " dead person " appear in the judgment. The question involved that case before the Supreme Court was whether a notification contemplated under section 7 or the proceedings under the said Act could issue in respect of the property of a person who was dead or whether it could issue only in respect of a person who was living. The antithesis was between " living " and " dead ". The Supreme Court was not called upon to decide, as in the case before us, between " person " as distinguished from " property ". We do not think that the Supreme Court has laid down, or had it even in its contemplation, that the said Act applies also to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this English case. Lord Keith's speech is, however, the dissenting speech, the decision of the majority being contained in the speech of Lord Morton. In Morgan's case , a company engaged in sugar refining, incurred expenses in a propaganda campaign to oppose the threatened nationalization of the industry. These expenses were claimed as a deduction under a provision under the English Income Tax Act which is similar to that under our section 10(2)(xv). The majority judgment is that of Lord Morton, Lord Reid, and Lord Asquith. In his speech, Lord Morton observed that the only purpose for which the money was expended was to prevent the seizure of the business and assets of the company. He further observed that the money so spent was spent for the purposes of the company's trade and that if the assets were seized, the company could no longer carry on the trade which had been carried on by the use of its assets and that money was spent to preserve the very existence of the company's trade. He further observed that the question was not whether trade can continue to exist after a change of ownership, but the question was whether the money so spent by the owner was to prevent seizure of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an expenditure incurred for the purpose of the trader carrying on his trade. Deductible expenditure would not include merely expenditure incurred for protecting individual asset or assets, but would include expenditure which is incurred for defending a challenge to the title of the trader to the entire business as an entity. The above Madras judgment has not been considered by the Supreme Court in the said case. The reason possibly was that the Madras judgment was delivered only a few months before the decision of the Supreme Court and it was not till then reported. But whatever it may be, in view of the Supreme Court judgment, the Madras judgment must be deemed to have been impliedly overruled and not containing good law. We, therefore, reject Mr. Joshi's contention which, as in the Madras judgment, seeks to distinguish between protecting an individual asset or assets of a trader and protecting the entire business as an entity. We, therefore, hold that the expenditure incurred by the assessee to the extent that it has been incurred for defending the proceedings seeking to declare the business of exhibiting pictures at the Imperial Cinema to be evacuee property, to be expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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