J K COTTON SPG AND WVG MILLS CO LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred for our opinion is :

(2.) THE fats found by the Tribunal on the basis of which this question has to be answered is that both these persons, Madanlal and H. P. Pasari, who were employers of the assessee -company, were accused of an offence of murder and were committed to jail as under -trial prisoners. Subsequently, they were acquitted. During the period that they were in jail they were not carrying out their ordinary duties which were entrusted to them as employees of the company. The company still made payments to both of them of their full salaries for the periods during which they were in jail and they were also allowed bonus. After considering the evidence of the parties, the Tribunal held that the assessee failed to prove that the payments to these persons were made out of any consideration of commercial expediency. The assessee comes forward with the plea that the payment was made because these persons were holding posts of responsibility and it was in the interest of the company to continue to pay them their salaries in order to avoid disclosure of companys secrets by them which would have been probable had no payments been made to them. On the material before it, the Tribunal rejected this plea as not established. There was the further plea that, while they were in jail, they were consulted by the employees of the assessee -company and they gave advice which was another consideration for making these payment. On this aspect of the case also the Tribunals finding is that there is no satisfactory proof that any advice was actually given. On the other hand, the finding was that both these persons were related to the directed -in -charge and another director and that it was this extra -commercial consideration which led to these payments being made to these persons. All these are essential findings of fact recorded by the Tribunal and we have to answer the question referred to us on the basis of these findings of fact. It appears to us that on these findings of fact it would not be possible to hold that this entire sum paid to these two persons while they were in jail was expenditure incurred wholly and exclusively for the purpose of the business.

(3.) AS a result, the question referred to us is answered in the negative, except with regard to payment of amounts and of Madanlal Singhania for a period of twenty four and half days. Since the question is being answered mainly against the assessee, the assessee shall pay the costs of the department. Fee of counsel is fixed at Rs. 200 (Rs. Two hundred).