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TMI Blog1989 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... r ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure of Rs. 6,000 disbursed for being incurred on maintenance of Ram Mandir, was not allowable under section 37(1) of the Income-tax Act ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expense items of Rs. 2,514, Rs. 24,801, Rs. 2,378 and Rs. 838 were hit by the provisions of section 37(2A) of the Income-tax Act ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in disallowing legal expenses amounting to Rs. 7,243 incurred in connection with the criminal litigation pertaining to criminal conspira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the court has to see is whether the legal expenses were incurred by the assessee in his character as a trader, in other words, whether the transaction in respect of which proceedings are taken arose out of and was incidental to the assessee's business. Further, we have to see whether the expenditure in question was bona fide incurred wholly and exclusively for the purpose of business." Next to be noted is the judgment of our court in J. N. Singh and Co. P. Ltd. v. CIT [1966] 60 ITR 732, where it was held, that "expenses incurred in defending an employee against a criminal prosecution with regard to a transaction carried out in the ordinary course of business of the assessee can be allowed as a permissible deduction". Such an expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... girji Raja Narasingirji's case [1973] 91 ITR 544 (SC), but, what is pertinent to note here are the observations of the Supreme Court in the latter case to the effect that the earlier cases where it had been held that the expenditure incurred by the assessee to defend himself against a criminal charge, did not fall under section 10(2)(xv) of the Indian Income-tax Act, 1922, were decisions on their own facts. Dhanrajgirji Raja Narasingirji's case [1973] 91 ITR 544 (SC) is thus what holds the field. Applying the test laid down therein, question No. (4) has clearly to be answered in the negative, in favour of the assessee and against the Revenue.
This reference is disposed of accordingly. There will, however, be no order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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