Litigation expense deduction fails where the dispute is really about company control and rival factions, not business protection.

Litigation expenditure is deductible only if incurred wholly and exclusively for the assessee's business. Where the dispute arises mainly from internecine rivalry over control of the company and disputed shares, and the company is used as a vehicle for that struggle, the expense is not treated as business expenditure. The Tribunal's finding that the resistance to the suit went beyond protection of business assets was supported by material on record and was not perverse. On that basis, the litigation costs were disallowed and the disallowance was sustained.

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Issues: Whether litigation expenses incurred by the assessee in defending the suit relating to disputes over control of the company and the disputed shares were allowable as business expenditure.

Analysis: The expenditure was claimed as deductible on the footing that the litigation was undertaken to protect the assessee's assets and business interests. The Court held that the Tribunal had adequate material, including the findings in the prior suit, to conclude that the litigation arose principally out of internecine disputes between rival groups seeking control of the company. The company was used as a vehicle in that struggle, and the resistance to the suit went beyond protection of book debts or business assets. The Court further held that the Tribunal's view was not perverse and that the expenses were not shown to have been incurred bona fide and wholly and exclusively for the purposes of the assessee's business.

Conclusion: The litigation expenses were not allowable as business expenditure and the disallowance was upheld.

Ratio Decidendi: Expenditure on litigation is deductible only when it is shown to have been incurred wholly and exclusively for the purposes of the assessee's business, and a dispute primarily concerned with control of the company or personal rivalry between groups does not satisfy that test.

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