G VEERAPPA PILLAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, Veerappa Pillai, was running a bus service. He had an account with the Hanuman Bank Ltd., Tanjore. THE bank provided him with overdraft facilities as well. When the bank went into liquidation in 1947, the official liquidators made a claim against the assessee for a sum of Rs. 2, 37, 600 as the amount appearing in the books of the bank as a debit against the assessee. THE assessee disputed the correctness of this amount, contending that there was an excess debit to the extent of one lakh of rupees. Proccedings were started by the official liquidators for recovery of the amount. Ultimately, the question was decided in favour of the assessee. During those proceedings, the assessee incurred certain legal expenses which be claimed were allowable in his assessments for the relevant assessment years 1949-50 to 1952-53. It may be mentioned that before the department and the Tribunal a claim was also made in respect of legal expenses connected with a criminal prosecution of the assessee. It would appear that these criminal proceedings were launched against the assessee, on the charge that he conspired with the directors of the bank in defrauding the shareholders. THEse proceedings dragged on for some years and finally the assessee was acquitted THE Income-tax Officer disallowed the entire expenditure, holding that it was not an expenditure incurred in connection with the assessee's business. On successive appeals, both the Appellate Assistant Commissioner and the Tribunal reached the same conclusion, holding that the expenditure was not incurred wholly and exclusively for the purpose of the business.

(2.) ON the application of the assessee, the Tribunal referred the following question

(3.) THIS argument cannot stand scrutiny as the Tribunal in its statement of the case has definitely stated that the assessee was having an account with the Hanuman Bank for business purposes.