RAMASWAMY AYYANGAR V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ONE RM.AR.AR.RM. Arunachalam Chettiar died on the February 23, 1938 leaving in will. He had assets in British India, Ceylon, Federated Malay States and Cochin China. The will was proved in British India and letters of administration were obtained in Colombo. Under the laws of Ceylon, Federated Malay States and Cochin China the executors were called upon to pay death duties. For the year of assessment 1939-40 the executors sought to deduct from the income of the estate for the year of account the expenses incurred in obtaining probate and letter so administration and also the amount which they had been compelled to pay in death duties. The Income-tax authorities held that these amounts were not deductible and the decision was up-held by the Income-tax Appellate Tribunal, Calcutta Bench. The estate is now in the hands of receivers appointed by the Subordinate Court of Devakotta and at the request of the receivers the Tribunal has referred to this court under Section 66 of the Indian Income-tax Act the following question :-

(2.) CLAUSE (xii) of sub-section (2) of Section 10 allows an assessee to deduct any expenditure (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 business, profession or vacation. Before the clause was amended by the Indian Income-tax Amendment Act of 1939, it provided for the deduction of expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits or gains. Before the amendment the Calcutta High Court in P. C. Mallick and D. C. Aich, In re, held that the cost of obtaining probate of a will could not be excluded from the chargeable income of the executors, and the decision was upheld by the Privy Council in Prabash Chandra Mullick v. Commissioner of Income-tax, Bengal, although the judgment of their Lordships laid stress on the wording of the will which directed the executors to pay the probate duty out of the income of the estate.