Seth Champalal Ramswarup, Beawar Vs. Commissioner of Income-tax, U.P. and V.P. - Court Judgment

JAGDISH SAHAI J. - The Income-tax Tribunal (hereinafter referred to as the Tribunal) has in pursuance of the directions given by this court dated 11th of December, 1957, allowing an application under section 66(2) of the Indian Income-tax Act (hereinafter referred to as the Act) submitted a statement of case and referred some questions of law to this court for answer. When the hearing of the case started before us a preliminary objection was taken by Mr. Gulati on behalf of the income-tax department (hereinafter referred to as the department) that this court has no jurisdiction to answer the questions of law referred to it and that it is the Rajasthan High Court alone which has jurisdiction in the matter. In order to appreciate this argument it is necessary to give certain dates. The Tribunal rejected the application of the assessee under section 66(1) of the Act on the 7th of July, 1950, whereupon the assessee made an application to this court under section 66(2) of the Act some time in 1951. That application was allowed on the 11th of December, 1957, and the Tribunal was directed to submit a statement of case and refer some questions of law.

Mr. Gulati has invited our attention to clause (8) of section 66 of the Act as amended by the Adaptation of Laws (No. 3) Order, 1956. That provision reads as unde :

'66. (8) For the purposes of this section, the High Court means -

(a) in relation to any State, the High Court for that State;

(b) in relation to the Union territories of Delhi and Himachal Pradesh, the High Court of Punjab;

(c) in relation to the Union territories of Manipur and Tripura, the High Court of Assam;

(d) in relation to the Union territory of the Andaman and Nicobar Islands, the High Court at Calcutta, and

(e) in relation to the Union territory of the Laccadive, Minicoy and Amindivi Islands, the High Court of Kerala.'

It is contended that in 1956, Ajmer, from which place the present case comes, has been included within the territorial limits of the State of Rajasthan and consequently for the purposes of clause (a) of sub-section (8) the High Court which will have jurisdiction is the High Court of Rajasthan and not this court.

In 1956 the States Reorganisation Act (XXXVII of 1956) was passed. It was enforced on the 31st of August, 1956. The relevant portion of section 10 of that Act reads as follow :

'10. Formation of new Rajasthan State - (1) As from the appointed day, there shall be formed a new Part A State to be known as the State of Rajasthan comprising the following territories, namel :....

(2) The territories comprised in the existing State of Ajmer shall form a separate district to be known as Ajmer district, and the territories referred to in clauses (c) and (d) of sub-section (1) shall be included in, and become part of, Sirohi and Jhalawar Districts respectively, in the new State of Rajasthan.'

Even though this Act included the areas comprising the original Ajmer district in the newly created State of Rajasthan, and made it one of the districts of that State, it is silent with regard to the pending proceedings in connection with income-tax matters.

There are, however, a few sections which require notice. Section 52 of this Act reads as follow :

'52. Jurisdiction of High Courts for new States. - The High Court for a new State shall have, in respect of any part of the territories included in that new State, all such original, appellate and other jurisdiction as, under the law in force immediately before the appointed day, is exercisable in respect of that part of the said territories by any High Court or Judicial Commissioners Court for an existing State.'

The effect of this provision is that the Rajasthan High Court would be the High Court for the district of Ajmer also and that court would have all such original, appellate and other jurisdictions as were exercisable in respect of the district of Ajmer by any High Court or Judicial Commissioners Court. The position before the passing of the States Reorganisation Act was that in respect of the income-tax matters, this court had jurisdiction over the district of Ajmer and in other matters the Judicial Commissioner of Ajmer had the jurisdiction. The result is that even in tax matters, arising out of areas constituting the Ajmer district, the Rajasthan High Court alone has jurisdiction. But the question that still requires consideration is as to whether that is so even with regard to references called for by this court and pending before it. In our opinion, such an inference is not deducible from the language of section 52. That is a general provision conferring jurisdiction on the Rajasthan High Court in respect of all cases arising out of the areas constituting the State of Rajasthan but does not deal with the specific matter relating to the decision of pending cases. For pending proceeding, the States Reorganisation Act (hereinafter referred to as Act No. XXXVII) has made separate provisions. It may be noticed that whereas section 64 of Act XXXVII clearly provides for the transfer of certain pending proceedings relating to the areas which were included in the State of Bombay and were by Act XXXVII to merge in the State of Rajasthan to the High Court of Rajasthan, there is no such provision with regard to the income-tax proceedings pending in this court. It would contribute to a clear understanding of the point if we reproduce section 64 of Act XXXVII of 1956 in extens :

'64. Transfer of proceedings to Rajasthan High Court - (1) As from the appointed day, the High Court of Bombay shall have no jurisdiction in respect of the territory transferred from the existing State of Bombay, to the new State of Rajasthan.

(2) Such proceedings in the High Court at Bombay or the High Court of Madhya Bharat immediately before the appointed day as are certified by the Chief Justice of that High Court, having regard to the place of accrual of the cause of action and other circumstances, to be proceedings which ought to be heard and decided by the High Court for the new State of Rajasthan (referred to in this Act as the High Court of Rajasthan) shall, as soon as may be after such certification, be transferred to the High Court of Rajasthan.

(3) All proceedings pending in the High Court of the existing State of Rajasthan immediately before the appointed day other than those certified under sub-section (1) of section 61 and all proceedings pending in the Court of the Judicial Commissioner for Ajmer immediately before the appointed day shall stand tranferred to the High Court of Rajasthan.

(4) Any order made before the appointed day by any court referred to in sub-section (2) or sub-section (3) in any proceedings transferred to the High Court of Rajasthan by virtue of sub-section (2) or sub-section (3) shall, for all purposes, have effect not only as an order of that court, but also as an order of the High Court of Rajasthan.'

It is noteworthy that whereas there is a direct provision for the transfer of all proceedings pending before the Judicial Commissioner of Ajmer and before the High Courts of Bombay and Madhya Bharat to the High Court of Rajasthan, there is no provision for the transfer of the income-tax references pending in this court to the High Court of Rajasthan. It is well settled that the question relating to the jurisdiction of a court or Tribunal has got to be determined on the basis of the conditions existing on the date when the suit or the proceedings were started. Thus, if on the date of the filing of the suit or the start of the proceedings a court had validly entertained the suit or the proceedings it would continue to be seized of it even though later on the area from which the suit or proceeding arises has gone out of the territorial limits of the jurisdiction of that court. This general rule has an exception the same being that if there is anything contained in any statutory provision to the contrary the question relating to jurisdiction of the court shall be governed by that provision. The view that we are taking finds support from the decision of the Federal Court in Venugopala Reddiar v. Krishnaswami Reddiar. In that case a suit was filed in an Indian court in respect of certain properties some of which were situated in Rangoon. The litigation was still pending when Burma Independence Act came into force and the question arose whether an Indian court should decide even in respect of properties situate in Burma. It was contended before the Federal Court that under the municipal law a court of one State cannot decide in respect of the properties situated in another independent State. But their Lordships held that in view of the fact that the Burma Independence Act did not contain any provision which extinguished the jurisdiction of the Indian courts in respect of suits already filed relating to properties in Burma, the Indian courts had jurisdiction in the matter. We have already said above that there is nothing in Act XXXVII which requires either the transfer of the present case or dismissal of the present proceedings on the ground that we have no jurisdiction to proceed further and we do not see any reason why the rule laid down in Venugopala Reddiar v. Krishnaswami Reddiar should not be followed in this case.

In this connection we would also like to notice two other provisions in Act XXXVII. Section 123 reads as follow :

'123. Legal proceedings - Where immediately before the appointed day, the Union or an existing State is a party to any legal proceedings with respect to any property, rights or liabilities subject to apportionment under this Act, the successor State which succeeds to, or acquires a share in, that property or those rights or liabilities by virtue of any provision of this Act shall be deemed to be substituted for the Union or the existing State as a party to those proceedings, or added as a party thereto, as the case may be, and the proceedings may continue accordingly.'

Section 125 reads thu :

'125. Provisions as to certain pending proceedings - (1) Every proceeding pending immediately before the appointed day before a court (other than a High Court), Tribunal, authority or officer in any area which on that day falls within a State shall, if it is a proceeding relating exclusively to any part of the territories which as from that day are the territories of another State, stand transferred to the corresponding court, Tribunal, authority or officer in the other State.

(2) If any question arises as to whether any proceeding should stand transferred under sub-section (1), it shall be referred to the High Court having jurisdiction in respect of the area in which the court, Tribunal, authority or officer before which or whom such proceeding is pending on the appointed day, is functioning and the decision of that High Court shall be final.

(3) In this section -

(a) proceeding includes any suit, case or appeal; and

(b) corresponding court, Tribunal, authority or officer in a State means -

(i) the court, Tribunal authority or officer in that State in which, or before whom, the proceeding would have lain if the proceeding had been instituted after the appointed day, or

(ii) in case of doubt, such court, Tribunal, authority or officer in that State as may be determined after the appointed day by the Government of that State, or before the appointed day by the Government of the corresponding State, to be the corresponding court, Tribunal, authority or officer.'

Two things emerge from the perusal of these two statutory provisions. Firstly, that in connection with all legal proceedings pending on the appointed day, in cases in which the State is a party, substitutiion shall take place in order to replace the State which has lost jurisdiction by the State which has acquired jurisdiction in respect of the territories to which that proceeding relates, and, secondly that all proceedings in a court other than a High Court shall stand transferred from the Tribunal or authority where they were pending to the corresponding Tribunal or authority of the State to which the areas are being transferred. It is noteworthy that though a suit or an appeal has been expressly included in the expression 'proceeding', nothing has been said about a reference under the Act. Neither of these two sections, therefore, apply to proceedings like the one before us.

For the reasons mentioned above, we are of the opinion that the objection of the department is misconceived and this court has jurisdiction to continue the hearing of this reference. We accordingly overrule the preliminary objection.

Coming to the merits, it may be stated that the following three questions of law have been referred to u :

'(1) Whether there was material on which the Tribunal could hold that the debt due from M/s. Ramjasmal Navrangrai of Bhawani had become bad and irrecoverable long prior to the assessment year 1944-45?

(2) Whether there was material on which the Tribunal could hold that the expenditure of Rs. 24,400 claimed as legal expenditure was not admissible under section 10(2)(xv) of the Indian Income-tax Act?'

(3) Whether there was material on which the Tribunal could hold that the expenditure of Rs. 24,400 claimed as legal expenditure did not pertain to the assessment year 1944-45 but pertained to an earlier year.'

The statement of the case relates to the assessment year 1944-45 and the accounting year ending Kartak Badi Amawas, S.Y. 2000, corresponding to Diwali year 1943. The assessee was a Hindu undivided family carrying on business as shroffs, bankers, merchants and commission agents at various places in India. They had a branch in Bombay where they carried on business in cotton both ready and forward. The circumstances in which question No. 1 arises are according to the statement of the case as follow :

Messrs. Ramjasmal Navrangrai used to carry on speculation business in cotton through the assessee and continued doing so till Samvat year corresponding to 1929-30 A.D. Whereafter, they did not carry on any such business with the assessee. A sum of Rs. 2,74,580 was due to the assessee, from Messrs. Ramjasmal Navrangrai as on October 22, 1930. In order to meet this debt liability Messrs. Ramjasmal Navrangrai transferred to the assessee some assets including shares in incorporated companies for a consideration of Rs. 1,72,304 leaving a debit balance of Rs. 1,03,176 in favour of the assessee. From Kartak 1988 (1931 A.D.) till 1998-99 (1941-42 A.D.), i.e., for ten years, the assessee realised nothing from Messrs Ramjasmal Navrangrai. However, later on during the accounting year ending Diwali 1946 certain ornaments were sold for a sum of Rs. 10,571-5-6, Rs. 10,000 of which was recovered by the assessee and the balance was given over to Messrs. Ramjasmal Navrangrai. In the assessment year in question an amount of Rs. 97,196 was written off as bad debt and the question for consideration before the Income-tax Officer was whether it had become bad debt in the year of assessment or in the earlier year. The Income-tax Officer held that the debt had become bad towards the end of Samvat year 1997 and should have been claimed in the relevant assessment year 1931-32. Dissatisfied with the order of the Income-tax Officer the assessee appealed to the Appellate Assistant Commissioner who did not give him any relief in respect of this matter. The assessee then filed an appeal before the Tribunal but there also he got no relief in respect of this particular item.

Mr. R.S. Pathak who has appeared for the assessee has strenuously contended before us that the question No. 1 should be answered in favour of the assessee because the Tribunal has based its findings on no material or at any rate it has failed to notice a lot of relevant and material evidence. Our attention was invited to two letters, annexures 'A' and 'B'. Annexure 'A' is a letter dated 10th March, 1937, addressed by Ramjasmal Navrangrai to the assessee. That letter reads as follow :

'To Bhai Champalalji Ramswarup at Bombay, read Jai Gopal of Ramjasmal Navrangrai of Bhiwani. Received your letter for Rs. 1,03,176-14-3 which are due to you we have given an acknowledgment for the same. We are much particular to send you your rupees but there is no source from where we can get moneys. We could not get moneys in our hands. On receipt of moneys we shall send the same to you. Dated Fagan Vad 13th S.Y. 1993.'

Read Jai Gopal of the writer Tulsi Ram. Annexure 'B' is in the following term :

'To Bhai Champalal Ramswarup at Siddha Shri Beawar read Jai Gopal of Ramjasmal Navrangrai from Bhiwani. We have received your letter and noted the contents. You have made a demand for moneys. That is alright. We are aware of the same. We have yesterday sent an acknowledgement note for Rs. 1,03,176-14-3 to Bombay. You may note the same. Please write letters and write for work. Dated Fagan Vad 2nd S.Y. 1996.

To Bhai Motilalji read Jai Gopal Morulal. Here all are happy; please inform us about your happiness.'

It is contended by Mr. Pathak that the law is well settled that a debt becomes bad debt only if all hopes of its realisation are lost and so long as there is a hope, however faint it may be, it cannot be said that the amount has become a bad debt. He has relied upon certain decisions in support of this contention. It is not necessary to notice those authorities in the present case because the question that is before us relates to the application of the principle of law rather than the acceptance of that well recognized principle.

Mr. Pathaks submission is that these two documents unmistakably reveal the intention of Ramjasmal Navrangrai to pay the debt and that no reasonable person after receipt of these letters could have reason to believe that the debt had become bad. In this connection, Mr. Pathak also invited our attention to the affidavits filed before the Income-tax Officer by Tulsi Ram and Motilal, as also the statements of Tulsi Ram and Motilal recorded by him. It is contended that these two affidavits and the two parole statements clearly show that the hopes for the realisation of this debt had not been lost and it was only after the realisation of Rs. 10,000 in the Diwali year 1946 that the assessee could reasonably treat the balance of Rs. 97,196 as a bad debt. Mr. Pathak also placed before us annexure 'H', letter dated Magh H. 5, S.Y. 2002 from Ramjasmal Navrangrai to Champalal Ramswarup. The said letter reads as follow :

'To Bhai Champalalji Ramswarup at Siddha Shri Navnagar. Read Jai Gopal of Ramjasmal Navrangrai from Bhiwani. We had dealings with your Bombay shop some time back. Settlement in respect thereof was made for Rs. 10,000, in words ten thousands, and we handed over to you ornaments of about Rs. 10,000. Our idea was to get back the ornaments on payment of your moneys but we have not got money. Therefore we are unable to send the moneys so please sell our ornaments and credit the sale proceeds to our account and square up our account. From now there is nothing due from us to you. Dated Magh Vad. 5th S.Y. 2002.

Please read Jai Gopal of the writer Marulal with best respects.'

The Tribunal has taken into consideration the following circumstances in concluding that the debt had become bad or unrecoverable much earlier;

1. Nothing had been recovered from the debtor for ten years; and

2. No interest was debited to the debtors account ever since Samvat year 1997.

The Tribunal has specifically referred to the statement of Tulsi Ram, the letter dated Phagun, Samvat year 1993, and the statement of Motilal, the assessee. On the basis of the circumstances and the material mentioned above, the Tribunal recorded a finding that in all probability the houses and the factory belonging to the debtor, Ramjasmal Navrangrai, were not available for the purpose of paying the assessees debt and 'the houses were probably mortgaged and the so-called factory was not worth very much'. The Tribunal, therefore, held that the debt had become bad towards the end of Samvat year 1987 and should have been claimed in the assessment year for which the previous years would be Samvat year 1987. It is not possible to say that there was no material on which the Tribunal has based its findings. The Tribunal has clearly mentioned the material, i.e., the statement of Motilal and Tulsi Ram and the letter dated Phagun, Samvat year 1993, and we have already referred to it earlier. It cannot also be said that when the Tribunal, on the basis of circumstances and pieces of evidence mentioned above, recorded the finding that the debt had become bad earlier, it did so arbitrarily, or that its conclusions are such which any reasonable man will not arrive at. We are not very much impressed by the submission of Mr. Pathak that the Tribunal did not consider some other pieces of evidence on the record to which its attention was invited. It is true that during the pendency of the appeal before the Tribunal an affidavit sworn by Durlabhdas Bhagwandas Javeri was filed and there is no specific reference to that affidavit in the order of the Tribunal nor is there a specific reference to the letters, annexure 'B' and annexure 'H'. It does not appear that the attention of the Tribunal was ever specifically drawn to these pieces of evidence. The Tribunal was an appellate authority and the burden was on the assessee to have satisfied it that the orders passed by the Income-tax Officer and the Appellate Assistant Commissioner were wrong. It is not the function of the appellate court or authority to peruse unasked for the record and find out for itself whether the judgment is right or wrong even though no argument might have been addressed to it or no grounds urged to show that the order of the court below is wrong. The Tribunal had to examine the orders of the Income-tax Officer and the Appellate Assistant Commissioner with a view to find out as to how far the grievances of the assessee against those orders were valid. It was not expected to make a roving enquiry, look into each bit of evidence itself and then come to a finding whether or not the orders passed by the Appellate Assistant Commissioner and the Income-tax Officer are correct. The difference between the approach of an appellate court from that of a trial court was explained by their Lordships of the Federal Court in Suraj Narain Anand v. State of North West Province, where their Lordships observed as follow :

'In theory as well as in practice, there is a well marked difference between a decision given by an officer who acts in the consciousness that he is primarily responsible for investigation and decision of the case and the act of one who is expected only to satisfy himself that another officer who had the primary responsibility has properly dealt with the case.'

It would appear from the judgment of the Tribunal that they have referred to such documents or evidence to which their attention was invited. They have observed as follows while dealing with the evidence of Tulsi Ram and Motilal, assesse :

'Our attention has been drawn to the evidence of Tulsi Ram and also to the evidence of N.S. Motilal.'

No affidavit has been filed before us either at section 66(2) application stage or the present stage that even though the attention of the Tribunal was invited to some pieces of evidence, it has ignored them and there is no material on the basis of which we can accept the submission of Mr. Pathak. Far from saying that the conclusions arrived at by the Tribunal are perverse, we have no doubt that on the material on the record the conclusion to which the Tribunal arrived at was one which any reasonable person could have arrived at. Learned counsel placed reliance upon Omar Salay v. Commissioner of Income-tax and invited our attention to the following passage in that judgmen :

'We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it, this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it.'

We have already mentioned the circumstances and the pieces of evidence on which the Tribunal based its conclusions. It has not even been complained that the Tribunal acted on suspicion or conjectures. The only complaint was that the Tribunal did not notice all the pieces of evidence on the record. We have already mentioned above that it has not been sworn before us that the Tribunal did not notice even those pieces of evidence to which reference was made by the learned counsel for the assessee in arguments before it. We do not find anything in the decision of Omar Salays case on the basis of which we can say that the Tribunal has not done its duty in a judicial manner. It has mentioned the circumstances and the pieces of evidence on which it relied and there was thus material in support of its conclusions. In the absence of there being either a positive allegation or an averment on oath that, even though its attention was invited to every piece of evidence it has not considered it, we cannot hold that the Tribunal has not considered certain pieces of evidence to which its attention was invited. In this connection we may also point out that it has been held that if a point does not find place in a judgment the presumption is that it was not argued before the court, which gave the judgment (see Lakhmichand Baijnath v. Commissioner of Income-tax). We may also mention that in Bhaichand Amoluk & Co. v. Commissioner of Income-tax, their Lordships after referring to the earlier decision in Omar Salay v. Commissioner of Income-tax were pleased to emphasise that even though the order of the Tribunal must show that it has considered all the points in favour and against the assessee, it is not necessary for it to have examined minutely sentence by sentence so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In our opinion the order of the Tribunal passed in the present case fulfils the requirements of both the decisions, i.e., Omar Salay, and Bhaichand cases. For the reasons mentioned above, we are of the opinion that question No. 1 should be answered in the affirmative.

We would now advert to the second question. In view of the decision in Commissioner of Income-tax v. Jagatjit Distilling and Allied Industries Ltd., against which nothing has been shown to us, it must be held that the expenses incurred by an assessee in connection with winding up proceedings including the counsel fee, travelling expenses and other legal expenses should be treated as part of the business expenditure within the meaning of section 10(2)(xv) of the Act. We, therefore, answer the second question in the negative in favour of the assessee and against the department.

With regard to the third question, it may be stated that the assessee claimed Rs. 24,000 as expenses incurred in opposing an insolvency petition in which he was adjudged insolvent in the year 1938 by the Bombay High Court and in executing mortgage deeds relating to the compensation scheme. The expenses were incurred in the period 1938 to 1941. The income-tax authorities and the Tribunal treated this claim to be a belated one. The submission on behalf of the assessee is that even though the system of accounting maintained by the assessee was the mercantile one, the solicitors not having presented their bills earlier the amounts in the bill became due to the solicitors only during the year of assessment. It appears that the solicitors claimed a sum of over Rs. 50,000 and ultimately the amount was settled at Rs. 24,000 and odd. Considering the circumstances of the case and the facts as stated by the Tribunal it appears that uptill the time when during the assessment year the bills were finally settled and the amount reduced to less than half the liability of the assessee was more or less a floating one and had not been finally determined. It is true that in the mercantile system of accounting mere accrual of liability is enough for its inclusion in the account but this liability must accrue and in view of the facts and circumstances of the present case we are of the opinion that the liability accrued only during the year of assessment. The amount of Rs. 24,000 odd claimed as expenses cannot be deemed to be as a belated claim. Our attention was invited to Calcutta Co. Ltd. v. Commissioner of Income-tax. That was a case where the assessee had bought lands and sold them for building purpose undertaking to provide a drainage system and instal lights, etc. When the plots were sold the purchaser paid only a portion of the purchase price and undertook to pay the balance in instalments. The appellants in its turn undertook to carry out the developments within six months but time was not of the essence of the contract. In the relevant accounting year the appellant actually received in cash only a sum of Rs. 29,392 towards the sale price of lands, but in accordance with the mercantile system of accounts adopted by it, it credited in its accounts the sum of Rs. 43,692 representing the full sale price of lands. At the same time it also debited an estimated sum of Rs. 24,809 as expenditure for the developments it had undertaken to carry out even though no part of that amount was actually spent. The department disallowed the expenditure. The Tribunal confirmed that finding. The question before the Supreme Court was whether the sum of Rs. 24,809, the estimated sum of expenditure, could be claimed. Their Lordships held that it could be claimed though the amount had not been received. Their Lordships observed as follow :

'Turning now to the facts of the present case, we find that the sum of Rs. 24,809 represented the estimated expenditure which had to be incurred by the appellant in discharging a liability which it had already undertaken under the terms of the deeds of sale of the lands in question and was an accrued liability which according to the mercantile system of accounting the appellant was entitled to debit in its books of account for the accounting year as against the receipts of Rs. 43,692-11-9 which represented the sale proceeds of the said lands. Even under section 10(2) of the Income-tax Act, it might possibly be urged that the word expended was capable of being interpreted as expendable or to be expended at least in a case where a liability to incur the said expenses had been actually incurred by the assessee who adopted the mercantile system of accounting and the debit of Rs. 24,809 was thus a proper debit in the present case.'

The facts of that case are distinguishable from the facts of the case before us. In that case there was an agreement and on the basis of it an assessment could be made fairly accurately. In the present case, the amount of the bills was not known nor could the amount be approximately calculated by the assessee. As we have said above from the claim of Rs. 50,000 the solicitors dropped down to a claim of Rs. 24,000 and odd. The assessee had not acknowledged the liability for the payment of this amount. It was only after the bill had been finally settled during the assessment year that the liability for payment of the same accrued against the assessee. In the circumstances, we think that, on the facts and circumstances of the present case, question No. 3 must be answered in the negative and in favour of the assessee. We, therefore, answer this question in favour of the assessee and hold that the assessee was entitled to claim the expenditure of Rs. 24,000 in the year under assessment.

In view of the fact that the parties have partly succeeded and partly failed, we direct them to bear their own costs. We, however, assess the fee of learned counsel for the department at Rs. 300.