COMMISSIONER OF INCOME-TAX, MADRAS Vs. ASPSKRKARUPPAN CHETTIAR

JUDGEMENT

(1.) In accordance with the order of this Court dated 10 January, 1947, in C. M. P. No. 3199 of 1946 the Appellate Tribunal has stated a case and referred the following question for our decision :- Whether on the facts and in the circumstances of this case the sum of Rs. 9,831 is expenditure allowable under Section 10 (2) (xii) of the Indian Income-tax Act ?

(2.) By the date of this order, under the provisions of the Amending Act, VIII of 1946, Section 10 (2) (xii) was re-numbered as 10 (2) (xv) and the question will be answered with reference to clause (xv) of the Act as it stands now.

(3.) The facts which appear from the statement of the case are that the assessee Karuppan Chettiar and his father was members of an undivided Hindu family carrying on money-lending business in Rangoon and Tantapin. In 1926 there was a partition between them and the money-lending business at Rangoon fell to the share of the father while that at Tantapin fell to the assessees share. In 1932 a person who had made a deposit with the joint family firm at Rangoon before the date of partition filed a suit for recovery of the amount due to him in respect of the deposit against the father as well as against the assessee and his son, apparently on the ground that the debt in question was a pre-partition debt for which the assessee would be liable under the Hindu law. The assessee contested the claim on the ground that there had been a separation in 1926 and the Rangoon business had fallen to the share of the father at the partition. His contention was upheld in the trial Court, but on appeal that decision was reversed by the High Court, and it appears that there is an appeal to the Privy Council pending. The assessee incurred expenses for the defence of the suit which amounted to Rs. 12,933. Out of this, a sum of Rs. 3,102 was claimed for the assessment year 1940-41 and was allowed by the Income-tax department. The balance of Rs. 9,831 was claimed for the succeeding assessment year, the year under reference. The Income-tax Officer did not allow the deduction but on appeal the Appellate Assistant Commissioner and the Appellate Tribunal have allowed the deduction following the decision of the Tribunal in respect of Rs. 3,102 relating to the preceding year.