Case: Commissioner of Income Tax (Central), Calcutta Vs. Mcleod and Company Limited

"arose in connection with the fictitious transactions indulged in by the company which were detected by its auditors after investigation. The expenses incurred as a result of such illegal activities were not the legitimate expenses of the appellant company incurred in the course of its business." On further appeal, the Appellate Tribunal by its order dated January 18, 1958, allowed the respondents claim for deduction accepting the assessees plea that the expenses were incurred to protect the assessees business as managing agents of various public companies and unless the fair name of the assessee was maintained its business would have suffered and certain managing agencies would have been lostThe Commissioner of Income-tax thereupon applied to the Tribunal under section 66(1) of the Income-tax Act of 1922 for a case to be stated to the High Court for reference of the following two questions of law:"(1) Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that the expenditure of Rs. 95, 868 was wholly and exclusively incurred for the purpose of maintaining the goodwill and reputation of the assessee-company was based on no evidence or was perverse in the accepted sense of the term ?(2) Whether, in any event, on the facts and in the circumstances of the case, the Tribunal was right in holding that the said expenditure was allowable as a proper revenue deduction ?"By order dated February 11, 1966, the Tribunal stated a case to the Calcutta High Court and referred only the following question of law"Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 95, 868 incurred for the purpose of maintaining the goodwill and reputation of the assessee-company was a permissible deduction in computing the assessees profits under section 10(2)(xv) of the Income-tax Act, 1922 ?"2. With regard to the first question the Tribunal said:"The Commissioner of Income-tax requested that question No. 1 as proposed by him in some form should also be referred. Since that question related to the finding of fact by the Tribunal that the expenditure of Rs. 95, 868 was incurred for the purpose of maintaining the goodwill and reputation of the assessee-company no question of law could arise as to whether the finding was supported by any evidence."3. The Commissioner of Income-tax thereupon applied to the High Court under section 66(2) of the Act wherein after referring to the finding of the Income-tax Officer and the Appellate Assistant Commissioner he complained that the conclusion to the contrary of the Tribunal was not supported by any material on the record and its finding was perverse in the sense that no reasonable man could have come to that conclusion. The Commissioners grievance was that on the form of the question drawn up by the Tribunal for the opinion of the High Court, the answer could only be in the affirmative, and against him. He further stated that the question framed did not set out the real point in controversy between the parties, viz., that there was no evidence before the Tribunal to come to the conclusion it did and alternatively on the material on record the conclusion was perverse in the sense that no reasonable man could come to the same findingIt appears to us that the question framed by the Tribunal was suggestive of the answer and the grievance of the Commissioner was not ill-founded. The statement of case by the Tribunal to the High Court was far from complete. In that statement the Tribunal after referring to the facts found by the Income-tax Officer and the Appellate Assistant Commissioner stated that"Since the major item of Rs. 58, 638 pertained to the bills of M/s. Orr Dignam & Co. the Tribunal perused the detailed statements of work done by M/s. Orr Dignam & Co. in connection with straightening out the affairs of the assessee-company. The Tribunal held that the expenditure had been incurred for the purpose of maintaining the goodwill and reputation of the assessee-company and that the expenditure had been wholly and exclusively incurred for this purpose."The above throws no light on the nature of the work done by the named firm of solicitors. An elucidation was necessary to permit the court to take the view that there was evidence to justify the conclusion arrived at by the Tribunal4. The real complaint of the appellant before us is that the statement of facts in the case stated by the Tribunal was not complete and that certain further facts should have been incorporated therein so that the questions of law which the appellant wanted the High Court to adjudicate upon could be properly gone into. Nevertheless, it appears to us that the appellant should have proceeded in the way indicated in N. V. Khandvala v. Commissioner of Income-tax, where Kania J. said"When a statement of case, with the question of law framed by the Tribunal, is filed in court for disposal, it a party is aggrieved and wants to contend that certain further facts ought to be stated, or certain questions of law should be raised, he can make an application by way of notice of motion. That should be heard along with the case stated by the Tribunal for the courts opinion. At that time the court will consider whether the statement of case is complete for the question of law raised by the Tribunal. The court can also consider whether on the case stated by the Tribunal the proper question is raised or not. That is the proper time for an aggrieved party to bring to the notice of the court that certain further and other facts are necessary to be stated or certain further or other questions of law arise and should be brought for decision by the court."The above was approved of by this court in the recent decision of Lakshmirattan Cotton Mills v. Commissioner of Income-tax, where the scope of section 66 of the Income-tax Act of 1922 was considered at some length5. We,

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Nevertheless, it appears to us that the appellant should have proceeded in the way indicated in N. V. Khandvala v. Commissioner of Income-tax, where Kania J.a statement of case, with the question of law framed by the Tribunal, is filed in court for disposal, it a party is aggrieved and wants to contend that certain further facts ought to be stated, or certain questions of law should be raised, he can make an application by way of notice of motion. That should be heard along with the case stated by the Tribunal for the courts opinion. At that time the court will consider whether the statement of case is complete for the question of law raised by the Tribunal. The court can also consider whether on the case stated by the Tribunal the proper question is raised or not. That is the proper time for an aggrieved party to bring to the notice of the court that certain further and other facts are necessary to be stated or certain further or other questions of law arise and should be brought for decision by theabove was approved of by this court in the recent decision of Lakshmirattan Cotton Mills v. Commissioner of Income-tax, where the scope of section 66 of the Income-tax Act of 1922 was considered at some length