COMMISSIONER OF INCOME TAX Vs. ROHTAS INDUSTRIES LIMITED

JUDGEMENT

(1.) This reference under section 66, clause (1) of the Indian Income-tax Act, 1922, by the Income-tax Appellate Tribunal is the instance of the Commissioner of Income-tax, in relation to the assessment year 1953-54.

(2.) The Rohtas Industries Limited, the assessee, claimed deduction of Rs. 9,062 which they incurred as expenses in connection with a case about the infringement by them of certain patent rights registered in the name of the Indian Hume Pipe Company. The assessee-company also manufacture hume pipes. The Indian Hume Pipe Company alleged that there was an infringement by the assessee-company of their (Indian Hume Pipe Companys) patent rights. Ultimately, the assessee-company lost the case, but that has got no material bearing on the question involved for consideration.

(3.) If the expenditure was incurred in connection with and exclusively for the business, then that it deductible from the gross profits for the purpose of assessment under section 10(2) (xv) of the Act. The primary purpose of the litigation is the deciding factor. According to the Appellate Tribunal, the expenditure was incurred by the assessee-company for defending themselves in respect of their manufactured goods and they had not mala fide committed any infringement of the alleged patent. In that view, the Appellate Tribunal was justified in allowing the deduction.