Mody, A.C.J:— This is a reference under section 66(1) of the Indian Income-tax Act, 1922.

2. One Aboobaker Abdul Rehman was the owner of a cinema theatre in Bombay, known as the Imperial Cinema, and several other immovable properties. He also carried on the business of exhibiting pictures in the Imperial Cinema. Under an indenture dated the 22nd October, 1946, Aboobaker and his three sons, Ebrahim (hereinafter referred to as “the assessee”), Hoosein and Alimahomed, formed a partnership to carry on that business of exhibiting pictures in the Imperial Cinema. Aboobaker gave to this partnership firm a monthly tenancy of the building of the Imperial Cinema for carrying on that business. In September, 1947, Hoosein and Alimahomed migrated to and settled in Pakistan. Some inquiries were made by the Deputy Custodian of Evacuee Property, Bombay, in respect of Hoosein and Alimahomed, and, thereafter, on the 4th of August, 1949, Aboobaker expelled Hoosein and Alimahomed from the partnership firm in pursuance of the provision contained in clause 13 of the partnership deed. The business was thereafter continued by Aboobaker and the assessee as the remaining partners. The shares of Hoosein and Alimahomed were thereafter declared to be evacuee properties.

3. In December, 1949, proceedings under the Administration of Evacuee Property Act, 1950 (hereinafter referred to as “the said Act”), were started against Aboobaker. The Additional Custodian of Evacuee Property made an order dated the 2nd February, 1950, holding that Aboobaker was not an evacuee, but was an intending evacuee. Against that order an appeal, as also a revision petition, were filed before the Custodian-General of Evacuee Property. In the meantime, Aboobaker died on 14th May, 1950. Aboobaker left him surviving his said three sons and a daughter, Hawabai. The shares of the two sons in the partnership business had vested in the Custodian of Evacuee Property as stated earlier, each of them having a 2/7th share. The assessee became entitled to a 2/7th share and Hawabai to the remaining 1/7th share. On 15th May, 1950, the Custodian-General dismissed the revision petition, but directed that further inquiries be made in the matter of the said appeal. Pending that appeal the assessee filed a writ petition in the High Court of East Punjab relating to the subject-matter of the said appeal. The decision of the High Court in that writ petition was taken to the Supreme Court. Pending the appeal to the Supreme Court, the Custodian-General passed an order, dated the 30th July, 1951, declaring Aboobaker an evacuee. The Supreme Court, however, in the matter of the said appeal pending before it, quashed this order by its judgment and order, dated the 10th April, 1953. The proceedings referred to in this paragraph, for the sake of convenience, will hereafter be referred to as “the first set of of”.

4. After Aboobaker died, the assessee, in exercise of the option to purchase Aboobaker's interest in the partnership in the business of exhibition at the Imperial Cinema available to him under the partnership deed, purchased Aboobaker's interest in that business and thereafter continued to carry on the business as its sole proprietor. Thereafter, the Custodian, by his notice, dated the 31st May, 1950, called upon the assessee to show cause why the monthly tenancy of the Imperial Cinema should not be terminated at the end of the next month of the tenancy. The assessee, thereupon, on the 23rd June, 1950, filed a writ petition against the Custodian in this High Court challenging the said notice. The High Court by its final order, dated the 5th October, 1950, restrained the Custodian from taking possession of the interest of the assessee and Hawabai in the Imperial Cinema, as also in the said business of exhibiting pictures in that cinema. These proceedings will hereafter be referred to as “the second set of of”.

5. Pending the second set of proceedings, the Custodian called upon the assessee and Hawabai to show cause why their properties should not be declared evacuee properties and thereafter by his order dated the 28th December, 1951, the Deputy Custodian declared the properties of both of them as evacuee properties. Several proceedings followed thereafter not only before the authorities under the said Act, but also in courts and an appeal to the Supreme Court. Finally, the Custodian-General by his order, dated the 1st October, 1960, held that the assessee's properties were not evacuee properties. These proceedings will hereafter be referred to as “the third set of of”.

6. In respect of the above three sets of proceedings the applicant incurred considerable legal expenses and he claimed the same as a deduction under section 10(2)(xv) on the ground that it was a business expenditure in respect of the assessment years 1952-53 to 1954-55 and 1955-56 to 1957-58. The claim of the assessee in respect of the first set of proceedings was confined to the expenses incurred by the assessee after the death of Aboo-baker. In respect of that claim for deduction the Income-tax Tribunal has finally disallowed the claim holding that primarily the provisions of the said Act apply to the acts of the person, the result whereof is that the property mentioned in the said Act becomes and is declared to be an evacuee property and that the expenditure by way of legal costs had been incurred by the assessee for the protection of his person and not for the protection of his properties or his said business. It is, however, of importance to note that the Tribunal reached its said conclusion and did not, therefore, decide several incidental questions which arose or would have arisen if its said decision was ultimately held not to be a correct decision in law. By way of illustration, we may state that the Tribunal has not decided the question of apportionment if and to the extent that it would arise as between the said three sets of proceedings inter se and as between the assessee and Hawabai; nor has the Tribunal decided whether the expenditure in respect of which a deduction was claimed was incurred wholly and exclusively for the purpose of the said business of exhibiting pictures at the Imperial Cinema or whether it was a non-business expendsiture or whether it was apportionable between the two. Nonetheless, the Tribunal has referred the following question:

“Whether, on the facts and in the circumstances of the case, the litigation expenses claimed by the assessee for the assessment year in question were allowable under section 10(2)(xv) of the Act?”

7. An answer to this question by a simple “yes” or “no” is likely to create confusion because it covers not only the point which the Tribunal has in fact decided, but also the points as mentioned by us earlier which the Tribunal has in fact not decided. It is, therefore, necessary to reframe the question. In paragraph 8 of the statement of the case there has been set out a contention urged on behalf of the assessee that the expenses fell under three categories and the three categories have been separately numbered and set out. To avoid any misunderstanding of the answer which we may give herein, we reframe the question as follows:

“Whether, on the facts and in the circumstances of the case, the litigation expenses claimed by the assessee for the assessment years in question in respect of the three items mentioned in paragraph 8 of the statement of the case were allowable under section 10(2)(xv) of the Act?”

8. We will now turn to consider the claim for deduction in respect of the second set of proceedings relating to the notice of termination of the tenancy of the Imperial Cinema given by the Custodian to the assessee. The Custodian gave that notice because 4/7th share in the building of the Imperial Cinema which had originally belonged to Hoosein and Alimahomed had vested in the Custodian and the Custodian purporting to act as the landlord and owner of the cinema building gave the said notice to the assessee in the latter's capacity of a lessee, as by that time the assessee had become the sole proprietor of the business of exhibiting pictures in the Imperial Cinema. It is quite clear that, although the person giving the said notice was the Custodian of Evacuee Property, he was, in giving that notice, acting like any other landlord attempting to terminate his lessee's lease. The parties were arrayed in the second set of proceedings as a landlord and a tenant and the subject-matter of the dispute did not relate to any question arising under or in respect of the said Act. The Tribunal has obviously lost sight of this aspect of the second set of proceedings. The principle on which the Tribunal has disposed of the appeal before it was mainly that the proceedings under the said Act were against the person and not the property of the assessee and that principle had, obviously, no application to the second set of proceedings. The Tribunal's judgment in respect of the second set of proceedings is, therefore, obviously wrong and the question, in so far as it relates to the second set of proceedings, will, therefore, have to be answered in favour of the assessee.

9. We will now turn to consider the position of the claim relating to the expenses in respect of the first and the third sets of proceedings. The first set of proceedings related to the proceedings against Aboobaker for declaring him as an evacuee. Aboobaker was till his death a partner in the business of exhibiting pictures in the Imperial Cinema. Aboobaker also owned other immovable property. On Aboobaker's death, the assessee and Hawabai, along with Hoosein and Alimahomed, succeeded to Aboobaker's immovable properties. The assessee was vitally interested in the said proceedings in so far as they related to the said business because Aboobaker had been a partner therein till his death. The assessee continued the litigation after Aboobaker's death for the reason, amongst other reasons, that his said business would be affected if Aboobaker was held to have been an evacuee before he died and his share and interest in the business was declared as having vested in the Custodian. The third set of proceedings was a direct threat to the assessee's said business, apart from the other properties or interests of the assessee and Hawabai. Now the question which arises is whether these two sets of proceedings posed a threat merely to the person of the assessee as held by the Tribunal or it was a threat, inter alia, to the assessee's property, being the said business itself. Mr. Palkhivala, the learned counsel for the assessee, has contended that the said Act does not in any way affect the person of the evacuee and that the evacuee, even after an order is made under section 7 of the said Act, continues to enjoy all his personal rights which he was entitled to prior thereto and that he continues to be even a citizen of India and to be entitled to all the rights available to him on that basis. In support of his contention that an order under section 7 of the said Act would affect not the person but only the property and that too the property specifically mentioned in the order, he relied upon several provisions of law. Mr. Joshi, the learned counsel for the department, however, contended that the nature of the proceedings under the said Act shows that they relate to the person of the evacuee concerned and not to his property and that, therefore, expenditure for defending such proceedings cannot at all be considered to have been incurred by the assessee in the course of his business. He contended that section 2(d) of the said Act defines “evacuee” and the definition contained in the various clauses thereunder clearly shows that in any proceedings for declaring a particular property to be an evacuee property the necessary and main issue would be whether the person concerned is an evacuee and that the other issue as to whether that particular property belongs to him or not would be a very minor issue. He further contended that rules 6 and 7 of the Administration of Evacuee Property (Central) Rules and Form No. 1 prescribed under them for the notice required to be given by section 7 show that what the evacuee is called upon to show cause against is the particular facts alleged against him contemplated by section 2(d), which acts are his personal acts. He pointed out that, for example, clause (i) of section 2(d) refers to an act of the person leaving India, clause (ii) refers to an act of a person residing in Pakistan, and clause (iii) refers to an act of a person of obtaining property in Pakistan. He contended that these are all his personal acts and, moreover, acts which are voluntarily done by him. He further contended that, in any event, the expenditure which a person served with a notice under section 7 would incur in defending against that notice, if the property specified in the notice was a business, would be incurred by him to preserve his title to the business and not in the conduct of the business or for carrying on that business. He contended that legal expenditure so incurred would not be incurred by the owner of the business as a trader, but as the owner of the trade and purely from personal considerations totally unconnected with the trade. He argued that it would be so because the threat under the said Act is not to the assets of the business, but to the right of the owner of the business.

10. Now the title of the said Act is “the Administration of Evacuee Property Act”. So far as the title of the said Act is concerned, it indicates that the said Act is concerned with evacuee property and not the person who is an evacuee. As contended by Mr. Palkhivala, the said Act was enacted in pursuance of the power contained in the Constitution of India, Seventh Schedule, List III, Entry No. 41, which reads:

“Custody, management and disposal of property (including agricultural land) declared by law to be evacuee property.”

11. He contended that this entry, which is the source of power for enacting the legislation itself, shows that the power of the legislature was confined to property and did not extend to the person of the evacuee. This particular entry clearly shows that the legislative power was confined to property and that it did not extend to the person of the evacuee. The preamble of the said Act also shows that the object of that Act was merely to provide for the administration of the evacuee property and in certain matters connected therewith, but that the said Act was not intended to deal with the person of the evacuee. The subject of the legislation is evacuee property, i.e, the property of an “evacuee”. It had, therefore, to provide a definition of “evacuee” and the necessary procedure for determining that a person was an evacuee. The definition is contained in sub-section (d) of section 2 of the said Act. The provisions of the various clauses of section 2(d) must, therefore, of necessity, lay down the basis or the principles or the acts for determining who is an evacuee. The only scope of the application of the contents of the definition contained in section 2(d), however, is to ascertain which person is an evacuee. But there the function of section 2(d) comes to an end. Subsequent sections of the said Act show that the Act applies only to the property of an evacuee after it is established that he is an evacuee as defined by section 2(d). The said Act does not contain any provision whatever for a formal declaration that a person is an evacuee. Section 7, however, does provide for a formal declaration by way of a notification that a particular property or properties is or are an evacuee property or evacuee properties. As the determination whether a person is an evacuee has to precede declaring his property to be evacuee property, section 7 naturally provides that where the Custodian is of opinion that any property is an evacuee property, he should first serve a notice as prescribed by the said rules to the persons interested, that he should thereafter hold an inquiry and that he should thereafter pass an order declaring any such property to be evacuee property. The rules as well as the form prescribed by the said rules for giving such notice require that the property must be specifically mentioned in that notice. After he serves such notice, two points would arise for his consideration: The first point would be, whether on the evidence placed before him, the person concerned is an evacuee or not, and the second point would be, whether the particular property mentioned in the notice belonged to that person or not.

12. Now it is Mr. Joshi's contention that in the proceedings resulting upon the service of such notice, the main and dominant purpose of the person on whom the notice is served in defending against the notice would be to save himself from being declared or considered an evacuee and that the question of his property being declared an evacuee property would be only a subsidiary question of a much lesser importance. To our mind this contention is not correct. The first thing to be noticed is that what the said Act provides for being notified is a particular property to be an evacuee property and not that a particular person is an evacuee. The said Act does not provide for any declaration being made even if a particular person falls within any of the clauses of section 2(d) and is, therefore, an evacuee if he possesses no property. In such a case there cannot be not only any declaration but even an inquiry whether he is an evacuee. It is only if such person happens to own property that the proceedings under the said Act can be started. Moreover, the said Act provides for only a specific property or specific properties to be declared an evacuee property or evacuee properties. If that evacuee happens to have properties other than those notified to be evacuee properties, he continues to be the owner of and to enjoy and deal with such other properties unless and until his such other property or properties are notified to be an evacuee property or evacuee properties. This clearly shows that his being held to be an evacuee does not even affect any of his properties unless such property is specifically notified to be evacuee property. But even after a property of an evacuee is notified to be evacuee property, the evacuee continues to be entitled to all his personal rights as before. He continues to enjoy all his family rights and all rights of succession and he continues to be a citizen of India and as such entitled to all the rights and privileges which any other citizen of India has and enjoys. The judgment of the Supreme Court in the first set of proceedings is in Ebrahim Aboobaker v. Tek Chand [1953] 56 Bom. L.R 6 and Mr. Joshi relied upon some observations therein and contended that after the Supreme Court considered the scheme of the said Act it reached the conclusion, as shown by certain observations in the judgment, that it was the person of the evacuee which was concerned in the proceedings under the said Act. For example, he relied upon the words appearing at page 10 of the report, “… the object of section 7 was to take proceedings against a living person….” Now it is true that the words “living person” and “dead person” appear in the judgment. The question involved in that case before the Supreme Court was whether a notification contemplated under section 7 or the proceedings under the said Act could issue in respect of the property of a person who was dead or whether it could issue only in respect of a person who was living. The antithesis was between “living” and “dead”. The Supreme Court was not called upon to decide, as in the case before us, between “person” as distinguished from “property”. We do not think that the Supreme Court has laid down, or had it even in its contemplation, that the said Act applies also to the person of the evacuee and not only to his property.

13. In support of the distinction which he made between expenditure having been incurred by a person to support his title to a business and expenditure incurred by him in the conduct or carrying on of the business, Mr. Joshi relied upon a judgment of a Division Bench of the Madras High Court in N. Selvarajulu Chetty and Co. v. Commissioner of Income-tax [1965] 56 I.T.R 29 Mad... In that case one Selvarajulu was carrying on business. He died leaving Padmini as his only surviving daughter. After his death certain relations of Selvarajulu carried on the business claiming it to be a joint family business. Later, Padmini was made a partner of the other persons in that business. She, however, thereafter filed a suit claiming that the business belonged solely to Selvarajulu as it was his self-acquired property and that she alone was entitled to that business and that her other partners had no right or interest in respect of that business. Her claim was ultimately upheld, but considerable expenses of litigation were incurred. These expenses were claimed as a deduction as business expenses. The Madras High Court held that the real scope of the allowance for business expenditure under section 10(2)(xv) is that the business regarded as an entity has to take steps and incur expenditure for the purpose of protecting itself against any inroads made upon its productive capacity, ownership of assets or the like, but where two disputing claimants claim title to the business as a whole, such dispute does not involve expenditure which can be regarded as having been expended for the purpose of the business as the expenditure is really incurred for and on behalf of the contending parties, each seeking to establish title to the entirety of the business in himself. This judgment supports the contention of Mr. Joshi which distinguishes expenditure incurred by a person to establish his title to the business and expenditure incurred by an owner of the business in the course of the carrying on of his business and even for protecting any asset of the business as distinguished from the business in its entirety considered as an entity. The judgment refers to the decision of the House of Lords in Morgan (Inspector of Taxes) v. Tate & Lyle Ltd. In making the distinction which the judgment makes, the Madras judgment has relied upon the speech of Lord Keith in this English case. Lord Keith's speech is, however, the dissenting speech, the decision of the majority being contained in the speech of Lord Morton.

14. In Morgan's case, a company engaged in sugar refining, incurred expenses in a propaganda compaign to oppose the threatened nationalization of the industry. These expenses were claimed as a deduction under a provision under the English Income Tax Act which is similar to that under our section 10(2)(xv). The majority judgment is that of Lord Morton, Lord Reid, and Lord Asquith. In his speech, Lord Morton observed that the only purpose for which the money was expended was to prevent the seizure of the business and assets of the company. He further observed that the money so spent was spent for the purposes of the company's trade and that if the assets were seized, the company could no longer carry on the trade which had been carried on by the use of its assets and that money was spent to preserve the very existence of the company's trade. He further observed that the question was not whether trade can continue to exist after a change of ownership, but the question was whether the money so spent by the owner was to prevent seizure of its assets, that is, money laid out for the purposes of the trade within the meaning of the relevant English rule. He further observed that it could not be that in no circumstances could it properly be held that a sum laid out to prevent the seizure of the whole of the company's business and assets was laid out “for the purposes of the trade” within the meaning of the English rule. The majority judgment held that the object of the expenditure being to preserve the assets of the company from seizure was to enable it to carry on and earn profits and there was no reason in law to hold that it was not a deductible expenditure. The said Madras judgment has, however, followed the distinction made by Lord Keith in his speech, which was a minority judgment, but that distinction is contrary to the principles adopted by the majority judgment.

15. Mr. Palkhivala has relied upon the judgment of the Supreme Court in Commissioner of Income-tax v. Malayalam Plantations Ltd. The Supreme Court reviewed a large number of English decisions on the subject, including the judgment in Morgan's case as also some Indian judgments and thereafter observed:

“The aforesaid discussion leads to the following result: The expression ‘for the purpose of business’ is wider in scope than the expression ‘for the purpose of earning profits’. Its range is wide: it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessse shall incur it in his capacity as a person carrying on the business.”

16. Therefore, the expenditure incurred for the preservation of the entire business as an entity and for defending against a claim of hostile title or against nationalization must be construed to be an expenditure incurred for the purpose of the trader carrying on his trade. Deductible expenditure would not include merely expenditure incurred for protecting individual asset or assets, but would include expenditure which is incurred for defending a challenge to the title of the trader to the entire business as an entity. The above Madras judgment has not been considered by the Supreme Court in the said case. The reason possibly was that the Madras judgment was delivered only a few months before the decision of the Supreme Court and it was not till then reported. But whatever it may be, in view of the Supreme Court judgment, the Madras judgment must be deemed to have been impliedly overruled and not containing good law. We, therefore, reject Mr. Joshi's contention which, as in the Madras judgment, seeks to distinguish between protecting an individual asset or assets of a trader and protecting the entire business as an entity. We, therefore, hold that the expenditure incurred by the assessee to the extent that it has been incurred for defending the proceedings seeking to declare the business of exhibiting pictures at the Imperial Cinema to be evacuee property, to be expenditure deductible under section 10(2)(xv). Our answer to the question is in the affirmative in so far as the litigation expenses claimed by the assessee in respect of all the three items mentioned in paragraph 8 of the statement of the case relate to the defence of the evacuee proceedings pertaining to the said business of exhibiting pictures at the Imperial Cinema.

17. The respondent to pay the applicant's costs.