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Issues: Whether expenses incurred in civil proceedings to challenge an executive order restricting the assessee's business and to recover seized goods were deductible as expenditure laid out wholly and exclusively for the purposes of the business under section 10(2)(xv) of the Indian Income-tax Act, 1922.
Analysis: The expression "for the purpose of the business" is of wide import and is not confined to expenditure directly incurred for earning profits. It includes expenditure reasonably and honestly incurred to protect the business, preserve its assets, or resist an executive or legislative measure that interferes with the carrying on of the business. The admissibility of such expenditure depends on the nature and purpose of the legal proceeding in relation to the business, and not on whether the proceeding ultimately succeeds. On the findings of the Tribunal, the proceeding was instituted to obtain relief against interference with the assessee's business and to secure restoration of seized goods, and it was not shown to be a case of defending a criminal prosecution for breach of the order.
Conclusion: The expenditure was deductible under section 10(2)(xv) as having been laid out wholly and exclusively for the purposes of the assessee's business.
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