Sabyasachi Mukharji, J.
1. The questions involved in this reference under Section 256(2) of the I.T. Act, 1961, are as follows :
'1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim deduction of Rs. 1,08,922 as a revenue expenditure ?
2. If the answer to question No. 1 is in the affirmative, whether the Tribunal was justified in disallowing the said claim of the assessee ?'
2. The relevant facts which pertain to the assessee's claim for deduction of Rs. 1,08,922 in respect of the assessment year 1962-63 are that under a deed of partnership dated January 10, 1957, K.S. Awasthi, S.S. Awasthi, George Philip and Dipak Dasgupta were carrying on business in tar and bitumen products under the name and style of M/s. Tar & Bitumen Products. Sri George Philip and one Sri Gupta, an employee of the said firm, floated a company called 'India Tar & Bitumen Products Pvt. Ltd.', later on changed to Tar and Bitumen Products P. Ltd. in benami names to carry on a parallel business. It is alleged that they not only utilised unlawfully the assets including the raw materials of the said firm but made use of the goodwill of the said firm in securing orders from the customers of the said firm. Under these circumstances, certain disputes arose between the Awasthis and others. The Awasthis lodged a complaint against these persons with the detective department of the State Police. Sensing that they would be prosecuted under the provisions of Cr. P.C., through a common friend, these persons approached for a settlement of the entire dispute. These persons admitted all the allegations made by the Awasthis. In order to forestall the probable criminal proceedings against them, these persons arrived at a settlement with the Awasthis. Under the settlement agreement dated October 22, 1962, the assessee was made liable to pay Rs. 1,08,920 to the said firm 'for unlawfully using the goodwill of the firm and utilising its assets including the stock-in-trade'. Under the terms of the said agreement, George Philip and S. K. Gupta agreed to transfer the entire shareholdings of India Tar & men Products Pvt. Ltd. to the said firm or its nominees. In this way, the Awasthis took over the shares from george Philip and S. K. Gupta in the India Tar & Bitumen Products Pvt. Ltd. In the above circumstances, the ITO disallowed the assessee's claim for deduction of Rs. 1,08,920 on the ground that the sum was paid for the unlawful use of the goodwill and utilisation of the assets of the said firm. The AAC upheld the action of the ITO. The assessee went up in appeal before the Tribunal. After setting out the facts, the Tribunal had referred to the decisions placed before it and was of the view that it was not disputed that the aforesaid amount was paid once arid for all and that too in a peculiar way. In this view of the matter and other facts stated hereinbefore along with the other fact that the payment was made in pursuance of an agreement alleged to have been made subsequent to the year in question, the Tribunal upheld the ITO's order disallowing the claim of the assessee. The Tribunal also observed that there was a lot of force in the alternative submission made on behalf of the revenue. In that view of the matter, we are of the opinion that the Tribunal had arrived at a correct decision. In the premises, question No. I is answered in the negative and in favour of the revenue arid in view of our answer to question No. 1, question No. 2 need not be answered. The parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.