COMMISSIONER OF INCOME TAX Vs. BENNETT COLEMAN AND COMPANY LIMITED

JUDGEMENT

(1.) RULE has been issued in respect of two questions raised by the Department in this application, viz. :

(2.) REALLY speaking, the two concerned questions relate to the two aspects of the same matter as to whether the legal expenses of Rs. 75,000 incurred by the assessee in connection with Petition No. 114 of 1967 could be said to have been incurred wholly and exclusively for the purpose of the business of the company. Petition No. 114 of 1967 had been filed by the Central Government against the assessee company and certain of its directors and officers seeking four prayers: (i) an order removing Smt. Rama Jain, Mr. Raj Narain Bagla, Mr. Narinder Kumar, Dr. L. M. Singhvi and Mr. Mauli Chand Sharma from the board of directors, (ii) an order restraining the said directors from interfering and intermeddling in the affairs of the assessee and its conduct and management, (iii) an order directing the removal of one P. K. Roy from acting or from his employment with the assessee and restraining him from acting or functioning in any capacity under the assessee and from interfering or intermeddling in its affairs, and (iv) an order directing the appointment of a special officer to manage and conduct the affairs of the assessee upon such terms and conditions with such powers and functions and for such period as the Tribunal might consider proper. After the petition was heard by the Tribunal for considerable length of time, ultimately, the jurisdiction of the Tribunal was taken away and the matter was transferred to this Court and the petition was proceeded with by this Court. In connection with these proceedings the assessee company incurred an expenditnre of Rs. 75,000 during the relevant year of account for which a deduction was claimed. The Tribunal has categorically recorded a finding to the effect that the aforesaid petition was resisted by the assessee only in regard to the last prayer that had been made by the Central Government. In other words, in the reply which the assessee filed it was contended that no appointment of special officer should be made as prayed for on the ground that the same would adversely affect the credit, reputation and management of the assessee and that such appointment was neither in the interest of the assessee nor in public interest nor freedom of press that it should be run by the special officer and that it would affect the freedom of speech and expression. The Tribunal has found that in so far as the allegations that were made by the Central Government in respect of the management, misappropriation and misconduct against its directors as well as its officers, the assessee company did not raise any plea as it was not concerned with those allegations. In fact, so far as the allegations made against the General Manager, P. K. Roy, were concerned, in view of the advice received by it from its counsel, the assessee was advised to get rid of the dishonest employee and that at a meeting of the board of directors held on October 16, 1964, a resolution had been passed in that behalf but the same had not been given effect to. In other words, it is clear from the aforesaid findings which have been recorded by the Tribunal that the assessee company filed its reply and resisted the petition only in so far as the appointment of special officer was sought by the Government in view of bona fide belief which it entertained that that appointment would adversely affect the credit, reputation and management of the assessee company and that it would also affect the freedom of speech and expression. It is after recording these facts that the Tribunal went on to hold that there was no manner of doubt that the said expenditure of Rs. 75,000 has been exclusively and honestly incurred to promote the interest of the assessee because the assessee, as advised, had in the said litigation only pleaded that the appointment of the special officer would adversely affect the reputation, credit and management as also the freedom of speech and expression. In this view, therefore, the expenditure was incurred by the assessee wholly and exclusively for the purpose of business of the assessee. It is in respect of this conclusion which has been reached by the Tribunal that the Department has sought a reference on the two questions mentioned above.

(3.) IT cannot be disputed, as was submitted by Mr. Joshi relying on the Supreme Court decision in Eastern Investments Ltd. vs. CIT (1951) 20 ITR 1, that though the question as to whether a particular expenditure is a capital expenditure or a revenue expenditure must be decided on the facts of each case, the final conclusion being one of law. But, as we have stated above, the findings that have been recorded by the Tribunal are clear that it is only in respect of the last prayer that was made by the Government, namely, the appointment of special officer to be in charge of the management of the business of the company that resistance was offered by the assessee company to the petition and that it did so as it took the view that such appointment would be against the public interest, against the business of the company which was to carry on the publication of newspapers containing news and views and that the assessee company did not plead in any way to the other allegations that were made in the petition. The only question that really survived with the Tribunal was whether the expenditure of Rs. 75,000 could be said to have been incurred by the assessee company wholly and exclusively for the purpose of business mentioned above. It cannot be disputed that the business which was and is being carried on by the assessee company is one of disseminating news and views by undertaking publication of The Times of India and other publications and it cannot be said that it took a wrong view when it decided to oppose the Government's petition only to the extent to which it sought the appointment of the special officer, when it took the view that such appointment would be against the business interest of the company and would be detrimental to the public interest of freedom of speech and expression. The Supreme Court, in Sree Meenakshi Mills' case (1967) 63 ITR 207, has observed that :