1. Rule has been issued in respect of two questions raised by the department in this application, viz. :
'(1) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the legal expenses of Rs. 75,000 incurred in connection with petition No. 114 of 1967 was allowable as revenue expenditure
(2) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was at all correct in in its earlier conclusion that the said expenditure could be said to have been incurred wholly and exclusively for the purpose of the business of the assessee ?'
2. Really speaking, the two concerned questions relate to the two aspects of the same matter as to whether the legal expenses of Rs. 75,000 incurred by the assessee in connection with Petition No. 114 of 1967 could be said to have been incurred wholly and exclusively for the purpose of the business of the company. Petition NO. 114 of 1967 had been filed by the Central Government against the assessee-company and certain of its directors and officers seeking four prayers : (i) an order removing Smt. Rama Jain, Mr. Raj Narain Bagla, Mr. Narinder Kumar, Dr. L. M. Singhvi and Mr. Mauli Chand Sharma from the board of directors, (ii) an order restraining the said directors from interfering and intermeddling in the affairs of the assessee and its conduct and management, (iii) an order directing the removal of one P. K. Roy from acting or from his employment with the assessee and restraining him from acting or functioning in any capacity under the assessee and from interfering or intermeddling in its affairs, and (iv) an order directing the appointment of a special officer to manage and conduct the affairs of the assessee upon such terms and conditions with such powers and functions and for such period as the Tribunal might consider proper. After the petition was heard by the Tribunal for considerable length of time, ultimately, the jurisdiction of the Tribunal was taken away and the matter was transferred to this court and the petition was proceeded with by this court. In connection with these proceedings the assessee-company incurred an expenditure of Rs. 75,000 during the relevant year of account for which deduction was claimed. The Tribunal has categorically recorded a finding to the effect that the aforesaid petition was resisted by the assessee only in regard to the last prayer that had been made by the Central Government. In other words, in the reply which the assessee filed it was contended that no appointment of special officer should be made as prayed for on the ground that the same would adversely affect the credit, reputation and management of the assessee and that the such appointment was neither in the interest of the assessee nor in public interest nor freedom of press that it should be run by the special officer and that it would affect the freedom of speech and expression. The Tribunal has found that in so far as the allegations that were made by the Central Government in respect of the management, misappropriation and misconduct against its directors as well as its officers, the assessee-company did not raise any plea as it was not concerned with those allegations. In fact, so far as the allegations made against the General Manager, P. K. Roy, were concerned, in view of the advice received by it from its counsel, the assessee was advised to get rid of the dishonest employee and that at a meeting of the board of directors held on October 16, 1964, a resolution had been passed in that behalf but the same had not been given effect to. In other words, it is clear from the aforesaid findings which have been recorded by the Tribunal that the assessee-company filed its reply and resisted the petition only in so far as the appointment of special officer was sought by the Government in view of bona fide belief which it entertained that that appointment would adversely affect the credit, reputation and management of the assessee-company and that it would also affect the freedom of speech and expression. It is after recording these facts that the Tribunal went on to hold that there was no manner of doubt that the said expenditure of Rs. 75,000 has been exclusively and honestly incurred to promote the interest of the assessee because the assessee, as advised, had in the said litigation only pleaded that the appointment of the special officer would adversely affect the reputation, credit and management as also the freedom of speech and expression. In this view, therefore, the expenditure was incurred by the assessee wholly and exclusively for the purpose of business of the assessee. It is in respect of this conclusion which has been reached by the Tribunal that the department has sought a references on the two question mentioned above.
3. In our view, having regard to the peculiar type of business that was carried on by the assessee-company, viz., publication of newspapers containing news and views and having regard to the findings which have been recorded by the Tribunal to the effect that the assessee-company had merely resisted the petition so far as the last prayer made by the Government was concerned, we feel that the answer to the two questions sought to be raised before us are self-evident.
4. It cannot be disputed, as was submitted by Mr. Joshi relying on the Supreme Court decision in Eastern Investments Ltd. v. CIT : 20ITR1(SC) , that though the question as to whether a particular expenditure is a capital expenditure or a revenue expenditure must be decided on the facts of each case, the final conclusion being one of law. But, as we have stated above, the findings that have been recorded by the Tribunal are clear that it is only in respect of the last prayer that was made by the Government, namely, the appointment of special officer to be in charge of the management of the business of the company that resistance was offered by the assessee-company to the petition and that it did so as it took the view that such appointment would be against the public interest, against the business of the company which was to carry on the publication of newspapers containing news and views and that the assessee-company did not plead in any way to the other allegations that were made in the petition. The only question that really survived with the Tribunal was whether the expenditure of Rs. 75,000 could be said to have been incurred by the assessee-company wholly and exclusively for the purpose of business mentioned above. It cannot be disputed that the business which was and is being carried on by the assessee-company is one of disseminating news and views by undertaking publication of The Times of India and other publications and it cannot be said that it took a wrong view when it decided to oppose the Government's petition only to the extent to which it sought the appointment of the special officer, when it took the view that such appointment would be against the business interest of the company and would be detrimental to the public interest of freedom of speech and expression. The Supreme Court, in the Sree Meenakshi Mills' case : 63ITR207(SC) , has observed that :
'However wrong-headed, ill-advised, unduly optimistic or over-confident in his conviction the assessee might appear in the light of the ultimate decision, expenditure in starting and prosecuting a civil proceeding cannot be denied as a permissible deduction in computing the taxable income merely because the proceeding had failed, if otherwise the expenditure was laid out for the purpose of the business wholly and exclusively, that is, reasonably and honestly incurred to promote the interest of the business. Persistence of the assessee in launching the proceeding and carrying it from court to court and incurring expenditure for that purpose is not a ground for disallowing the claim.'
5. In the instant case, even the ultimate decision has shown that the resistance which was offered by the assessee-company, so far as the last prayer in the petition was concerned, was justified and properly advised, inasmuch as this court rejected the prayer of appointment of the special officer for management of the business of the assessee-company and instead appointed a composite board of directors on which there were representatives of the Government, of the company and of the court. The Tribunal has also found that the resistance made by the assessee-company to the petition was in the bona fide belief that the appointment of such special officer would adversely affect the reputation, credit and management of the assessee-company and it would also affect the freedom of speech and expression.
6. Having regard to the aforesaid position, it seems to us clear that the answers to the two questions which have been raised are self-evident having regard to the nature of business undertaken by the assessee-company and the findings which have been recorded by the Tribunal.
7. Rule is, therefore, discharged with costs.