CALICUT TILE CO FEROKE Vs. CIT KERALA

JUDGEMENT

(1.) The question referred to the High Court is "whether the sum of Rs. 21,809/- or any part thereof paid by the assessee as compensation for wrongful cutting of trees is an admissible expense in the assessment year 1957-58 under S.10(2)(xv) of the Indian Income Tax Act, 1922".

(2.) The assessee, a registered firm, entered into an agreement with a Nair tarwad for the purchase of trees for fuel to run its factory. Some members of the tarwad questioned the transaction in a partition suit; and the High Court of Madras directed the Subordinate Judge's Court, Calicut to hold an auction of the trees pending suit. In the auction that followed the assessee purchased the right to cut trees on 11th February 1942. Subsequently, the Nair tarwad filed a suit against the assessee for damages for unauthorised cutting of trees. The Trial Court (the Subordinate Judge's Court and not the court of the Munsiff as stated by the Tribunal) dismissed the suit; but on appeal the High Court of Madras awarded compensation of Rs. 10,400/- with interest thereon at 6 per cent from 20th March 1944. This decree was passed on 24th February 1955; and the assessee paid the amount in December 1956. The question for consideration is whether this payment is an admissible expense in the assessment year 1957-58 under S.10(2)(xv) of the Income Tax Act of 1922.

(3.) The counsel of the Revenue argues that the expense is not admissible under S.10(2)(xv). We will have allowed the counsel to raise this contention but for the fact that one of the nine findings recorded by the Tribunal is "that the expenses were incidental to the trade carried on in the accounting years pertaining to 1943-44 and 1944-45 assessments and not to 1957-58". In view of this finding, we do not think that the question whether the expense is admissible under S.10(2)(xv) is open for discussion before us. The question therefore is confined to whether this is admissible in the assessment year 1957-58.