Business expenditure deductible when incurred to resist coercive or unlawful proceedings threatening the business's preservation and assets.

Law charges incurred to contest proceedings before the Income-tax Investigation Commission were treated as deductible business expenditure because the expression "for the purpose of the business" is wider than earning profits and includes protection of business assets and resistance to coercive or unlawful interference. Applying that principle, expenditure laid out wholly and exclusively to safeguard the business from proposed additional taxation and penalties was regarded as commercially expedient and allowable under section 10(2)(xv) of the Indian Income-tax Act, 1922. The reference was answered against the revenue, and the assessee's deduction claim and costs were accepted.

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Issues: Whether law charges incurred in connection with proceedings before the Income-tax Investigation Commission were allowable deductions in computing business profits under section 10(1) or section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The expression "for the purpose of the business" is wider than "for the purpose of earning profits" and may include measures taken for preservation of the business, protection of its assets, and resistance to coercive or unlawful action affecting the business. Expenditure incurred in civil proceedings to secure freedom from interference with the carrying on of business has been treated as deductible where it is laid out wholly and exclusively for business purposes. Applying that principle, the investigation proceedings, though not civil, were aimed at probing past income with the object of additional taxation and penalties; opposing such an unconstitutional and coercive process was treated as a step taken to safeguard the business and its profits from unlawful inroads.

Conclusion: The law charges were allowable deductions under section 10(2)(xv) as expenditure incurred wholly and exclusively for the purposes of the business.

Final Conclusion: The reference was answered in the negative, resulting in acceptance of the assessee's claim for deduction and costs.

Ratio Decidendi: Expenditure incurred to resist unlawful or coercive action that threatens the preservation of a business may be deductible if it is commercially expedient and laid out wholly and exclusively for the purposes of the business, even though it is not directly incurred to earn profits.

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