Alfred Henry Lionel Leach, C.J.
1. One RM. AR. AR. RM. Arunachalam Chettiar died on the 23rd February, 1938, leaving a will. He had assets in British India, Ceylon, Federated Malay States and Cochin China. The will was proved in British India and letters of administration were obtained in Colombo. Under the laws of Ceylon, Federated Malay States and Cochin China the executors were called upon to pay death duties. For the year of assessment 1939-40 the executors sought to deduct from the income of the estate for the year of account the expenses incurred in obtaining probate and letters of administration and also the amount which they had been compelled to pay in death duties. The Income-tax authorities held that these amounts were not deductible and the decision was upheld by the Income-tax Appellate Tribunal, Calcutta Bench. The estate is now in the hands of receivers appointed by the Subordinate Court of Devakottah and at the request of the Receivers the Tribunal has referred to this Court under Section 66 of the Indian Income-tax Act the following question:
Whether expenditure incurred in connection with death duty, for obtaining letters of administration and for obtaining probate of the will of the deceased owner, is not deductible under Section 10(2)(xii) of the Act?
2. Clause (xii) of Sub-section (2) of Section 10 allows an assessee to deduct any expenditure ' not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation.' Before the clause was amended by the Indian Income-tax Amendment Act of 1939, it provided for the deduction of expenditure ' (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits or gains.' Before the amendment the Calcutta High Court in P.C. Mallick and D.C. Fich, In re : 4ITR369(Cal) held that the cost of obtaining probate of a will could not be excluded from the chargeable income of the executors, and the decision was upheld by the Privy Council in Prabash Chandra Mallick v. Commissioner of Income-tax, Bengal although the judgment of their Lordships laid stress on the wording of the will which directed the executors to pay the probate duty out of the income of the estate.
3. Mr. C. Padmanabha Aiyangar, on behalf of the receivers, has very rightly conceded that in view of the amendment of the clause he cannot contend that the cost of obtaining probate and letters of administration are deductible; but he says that the sums paid in death duties in Ceylon, Federated Malay States and French Cochin China are deductible because they were sums paid in order to enable the executors to carry on the testator's business in those countries. We are unable to accept this argument. Only the expenditure laid out wholly and exclusively for the purpose of the business can be deducted and in our judgment it cannot be said that these payments were made wholly and exclusively for the purpose of carrying on the testator's business. A death duty is a duty imposed by a State for the benefit of the State. Whether the business is carried on or not is no concern of the State. The executors had to make the payments because the law demanded that they should. They represented the estate.
4. The answer to the question referred is that the expenditure incurred in payment of death duties and in obtaining probate and letters of administration is not deductible under Section 10(2)(xii) of the Act.
5. The Receivers must pay out of the estate the costs of the Commissioner of Income-tax, Rs. 250.