| Case ID |
008a800b-3c38-44ba-8417-1fd66b9be988 |
| Body |
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| Case Number |
IT REFERENCE No. 40 OF 1961 |
| Decision Date |
Sep 25, 1962 |
| Hearing Date |
|
| Decision |
The court held that the expenditure incurred by the assessee company to defend itself against a winding-up petition filed by one of its shareholders was wholly and exclusively laid out for the purpose of its business. The expenditures of Rs. 23,236 and Rs. 12,250 for the assessment years 1957-58 and 1958-59, respectively, were allowable as deductions under section 10(2)(xv) of the Indian Income-tax Act. The rationale was that the expenditure was necessary for the company to continue its business operations and prevent its dissolution. The ruling emphasized that expenses incurred to defend the business's existence are integral to its revenue operations. |
| Summary |
In the case of All India Reporter Ltd. v. Commissioner of Income Tax, the Bombay High Court addressed the issue of whether legal expenditures incurred by a company in defending against a winding-up petition could be considered allowable deductions under the Income Tax Act. The court determined that expenditures aimed at preserving the company's ability to operate and earn profits are indeed deductible. This case is pivotal in understanding the treatment of business expenditures related to legal defenses. The court's ruling aligns with previous judgments where expenses to protect business interests were deemed necessary for revenue generation. This case underscores the importance of legal protections for businesses, particularly against shareholder actions that threaten their existence. The decision serves as a precedent for similar cases where companies incur costs to defend their operational integrity, reinforcing the principle that such expenses are essential for maintaining the business's profitability and sustainability. |
| Court |
Bombay High Court
|
| Entities Involved |
All India Reporter Limited,
V.V. Chitaley
|
| Judges |
Y.S. Tambe,
V.S. Desai
|
| Lawyers |
M.B. Samarth,
N.P. Gokhale,
G.N. Joshi,
R.J. Joshi
|
| Petitioners |
All India Reporter Ltd.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1963 SLD 438,
(1963) 49 ITR 196,
(1964) 9 TAX 44
|
| Other Citations |
Morgan (Inspector of Taxes) v. Tate and Lyle Ltd. [1954] 26 ITR 195 (HL),
CIT v. Jagatjit Distilling and Allied Industries Ltd. [1961] 41 ITR 328,
Van Den Berghs Ltd. v. Clark (H.M. Inspector of Taxes) [1935] 3 ITR (Suppl.) 17,
CIT v. Raman and Raman Ltd. [1951] 19 ITR 558 (Mad.),
Mahabir Parshad & Sons v. CIT [1945] 13 ITR 340 (Lah.),
Noble Ltd. v. Mitchell (Inspector of Taxes) (1962) 11 Tax Cas. 372,
Southern (Inspector of Taxes) v. Borax Consolidated Ltd. [1942] 10 ITR (Suppl.) 1 (KB),
Strong and Co. of Romsey Ltd. v. Woodifield (Surveyor of Taxes) (1906) 5 Tax Cas. 215,
CIT v. H. Hirjee [1953] 23 ITR 427
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
37(1)
|