Subba Rao J. - (1.) These two appeals by special leave raise the question whether the estate duty paid by the resident Company, hereinafter called the assessee, incorporated outside India, on behalf of members not domiciled in India is deductible from its profits in computing its assessable income under S. 10(2) (xv) of the Indian Income-tax Act, 1922, hereinafter called the Act.
(2.) The material facts are not in dispute and they may be briefly stated. The assessee is a resident Company incorporated outside India. Most of its shareholders are in the United Kingdom. During the accounting period ending March 31, 1955, it paid £1, 302-9-4 and £1, 303 towards estate duty which was payable on the death of certain shareholders who were not domiciled in India. The assessee debited the said amounts to revenue is its accounts in ascertaining the profits and gains of its business for the said year. Similarly, for the accounting year ending March 31, 1956, it paid a sum of £ 3, 809-1-5 towards estate duty payable on the death of certain shareholders and debited the said amount to revenue in its accounts in ascertaining the profits and gains of its business for that year. The Income- tax Officer included the said amounts so paid towards estate duty in the profits and gains of the company for the said two accounting periods and assessed the company to income-tax for 1955-56 and 1956-57 on that basis. The appeals preferred by the assessee to the Appellate Assistant Commissioner were dismissed. On further appeal to the Appellate Tribunal it held that the assessee was entitled to deduct the said amount in computing its profits; and on that finding it set aside the orders of the Appellate Assistant Commissioner. On an application made by the Commissioner of Income-tax, the Appellate Tribunal stated a case under S. 66(1) of the Act to the Kerala High Court, and referred the following question of law for its opinion: "Whether on the facts and in the circumstances of the case, the estate duty paid by the Company under S. 84 of the Estate Duty Act, 1953, is a revenue expenditure deductible in computing the assessee's business income for the assessment years in question - The High Court agreed with the view expressed by the Appellate Tribunal and answered the question referred to it in the affirmative. The present appeals by special leave have been filed against the said order of the High Court.
(3.) Mr. Rajagopal Sastri, learned counsel for the Commissioner of Income-tax, raised before us the following two points:(1) The sums paid by the assessee under S. 84 of the Estate Duty Act, 1953, are not expenditure of the Assessee-Company and, therefore, they cannot be deducted from its profits in computing its assessable income under S. 10(2)(xv) of the Act; and (2) even if it is revenue expenditure, it is not laid out or expended wholly or exclusively for the purpose of the assessee's business within the meaning of the said sub-clause.;