Deductibility of winding-up defence costs as business expenditure recognised where litigation threatened the company's existence.

Expenses incurred by a company in defending winding-up litigation, including legal and travelling expenses, were treated as business expenditure because the proceedings went to the very existence of the business and were incurred to protect it. On that settled principle, such outgoings were deductible under the Income-tax Act. The document also notes that, because the legal position was already settled, no referable question of law survived for reference under the Act. The overall position stated is that the deduction issue was resolved in favour of the assessee.

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Issues: Whether the expenses incurred by the assessee-company in defending winding-up litigation, including legal and travelling es, were deductible as business expenditure under the Income-tax Act, and whether any referable question of law arose.

Analysis: The litigation directly concerned the very existence of the company, and the expenditure was incurred to defend the business. Such expenses were treated as deductible under section 10(2)(xv) of the Income-tax Act, following settled authority. In view of that settled position, no question of law survived for reference under section 66(2) of the Income-tax Act.

Conclusion: The expenses were deductible, and no referable question of law arose. The answer was in favour of the assessee.

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