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TMI Blog1971 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Incometax Act, 1922, for the opinion of this court on the following question of law : " Whether, on the facts and the circumstances of the case, the expenses of Rs. 6,200 incurred in litigation are of revenue nature and entitled to deduction under section 10 of the Income-tax Act ? " The assessee is a limited company engaged in the business of generation and supply of electricity. It had some surplus funds. Out of the surplus funds, a sum of Rs. 45,000 was invested in fixed deposit with a non-scheduled banking concern of the name and style of M/s. Mansa Ram & Sons. Besides, it had another account with that bank called as "war costs surcharge account", in which there was a credit balance of Rs. 897. The company came to know tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under which the claim was made ; but, obviously, the claim fell under section 10(2)(xv) of the Income-tax Act, 1922. The material portion of section 10 reads : " 10. (1) The tax shall be payable by an assessee under the head 'Profits and gains of business, profession or vocation ' in respect of the profits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely : (xv) any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not cease to be the business asset. It is a matter of common knowledge that companies do invest large sums of money representing their surplus profits and reserve funds. It may be possible in the case of an individual to hold, on appropriate material, that some surplus funds have been taken out by him out of the business assets and put in an investment of different kind, but the case of a company stands on a different footing. In a company, which is formed for business, all its assets represent business assets. It is rather difficult to visualize that a limited company could segregate any of its assets and treat it as private property. Nothing has been placed on the record to show that the company took any step to take this amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. Both the cases related to the allowance of a bad debt. The considerations for allowing a bad debt as a deduction are different from the considerations upon which an expenditure is allowed as a deduction as being an expenditure incurred wholly and exclusively for the purpose of the business. Under the Income-tax Act, 1922, a claim for bad debt falls for consideration under section 10(2)(xi) while expenditure incurred for purposes of business falls under section 10(2)(xv). In the case of Curtis v. J. & G. Oldfield, a company claimed as trading loss a certain sum of money, which had been misappropriated by its managing director and had been written off as a bad debt. The claim was disallowed on the ground that the loss suffered by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing or protecting any asset. The primary object of a criminal proceeding is to see that the guilty person is punished. Sri Gopal Behari argued that criminal proceedings had been taken with a view to putting pressure upon Sri Mander Dag so that he could make good the loss caused to the assessee-company. There is no finding that was the intention with which the criminal proceedings were had lanched against Sri Mander Dag nor indeed is there any finding that as a result of criminal action the company was able to recoup its loss. In fact, the finding is that Sri Mander Dag was convicted and fined. In any event, even if one of the reasons for launching a criminal proceeding was to put pressure upon Sri Mander Das, the expenditure could not be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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