Ansari, J.:— The following question has been referred to this court by the Income-tax Appellate Tribunal, Delhi Bench (hereinafter referred to as “the Tribunal”), under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as “the Act”):
“Whether, on the facts and circumstances of the case, the sum of Rs. 30,959 spent by the assessee in the criminal case against Ramji Dass, director, and the employees of the assessee-company for the offence of bribery was not incidental to the assessee's business and was not an item of admissible deduction?”
2. As the question itself indicates, the amount of Rs. 30,959 represented the expenses incurred by the assessee-company during the accounting year relevant to the assessment year 1958-59, in connection with a criminal case against Ramji Dass, director, and other employees of the company. The assessee-company claimed allowance for this amount as revenue expenditure under section 10(2)(xv) of the Act. The assessee's claim was disallowed by the Income-tax Officer following the disallowance in respect of a similar claim of the assessee-company in the earlier assessment years 1956-57 and 1957-58. The disallowance was confirmed by the Appellate Assistant Commissioner and also by the Tribunal. The Appellate Assistant Commissioner and the Tribunal confirmed the disallowance following their orders in the earlier assessment years 1956-57 and 1957-58. The Tribunal has referred this question to this court under section 66(1) of the Act at the instance of the assessee, as it had also referred similar questions to this court in respect of the earlier assessment years also.
3. By its judgment in Income-tax Reference No. 18/63, which was the assessee's own case for the assessment year 1956-57, decided on February 17, 1967 (Lakshmiji Sugar Mills Co. Ltd. v. Commissioner of Income-tax [1967] 66 ITR Sh. N. 21 Delhi.), a Division Bench of this court had allowed the assessee's claim on the ground that where a company incurred expenditure in defending an employee, such an expenditure was incurred to protect the good name of the business, the prosecution having emanated with regard to an act which took place in the ordinary course of business and, therefore, the expenditure would be wholly and exclusively for the purpose of the business. In so holding, this court had followed the decision of the Punjab High Court in J.N Singh and Company Private Ltd. v. Commissioner of Income-tax [1966] 60 ITR 732 Punj.. Though the amount claimed by the assessee in the present year is different from the amount claimed by the assessee in the earlier years, the rule laid down by this court in the assessee's own case in the earlier years is applicable to the assessee's claim for this year also. There appears to be no dispute about the actual amount of expenditure incurred by the assessee. We have, therefore, to hold that the sum of Rs. 30,959 spent by the assessee in the criminal case against Ramji Dass and other employees of the assessee-company is allowable under section 10(2)(xv) of the Act. The question is, therefore, answered in the affirmative, i.e, in favour of the assessee and against the department. There shall, however, be no order as to costs.
4. Question answered in the affirmative.