The Commissioner Of Income Tax v. M/S.rdi Print & Publishing Pvt.ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL(L) NO.495 OF 2003 The Commissioner of Income Tax Vs. M/s.RDI Print & Publishing Pvt.Ltd. ..Appellant ..Respondent Mr.Ashok Kotangale, A.G.P. with Mr.P.S.Sahadevan forthe Appellant.Mr.P.J.Pardiwalla with Ms.Rushvi N.Shahi/b.M.S.Bodhanwalla & Co. for the Respondent. P.C. CORAM :- DR.S.RADHAKRISHNAN &V.C.DAGA, JJ.DATE : 16TH APRIL, 2007 1.Heard the learned Counsel for the parties. In the present Appeal, the following substantial question of law is sought to be raised: "Whether the litigation expenses incurred by theassessee for saving the assets and investment ofsubsidiary company M/s.Samrat holding Pvt.Ltd.is allowable as Business Expenditure of theassessee under Section 37 of the Income Tax Actwhen both the companies i.e. Subsidiary as wellas holding company are Separate and distinctLegal entities under Income Tax Law?" If the answer is in affirmative "Whether thelitigation expenses incurred in the earlier yearsby the subsidiary company which has beenreimbursed by the holding company in the currentassessment year will entitle the holding companyas allowable business expenditure under Section37 of the Income Tax Act in the currentassessment year ?" 2. We have perused the order passed by the Tribunal, wherein it is observed that: It was due to the litigation and in consequenceof the Order passed by the Company Law Board thatthe shares allotted by the management werecancelled and the assessee company once again gotthe controlling rights of its subsidiary company.In these facts we hold, that the litigationexpenses are attributable to both i.e. rivalrybetween the two groups of share holders to gaincontrol and management of the company as well asto safeguard the interest of the assesseecompany. Both these two being inter-dependent oneach other and there being no definite formula tobifurcate the litigation expenses pertaining torivalry of the two groups of shareholders and theexpenses pertaining to safeguard the interest ofthe company, we consider it reasonable to allow50% of these litigation expenses as pertaining tohaving incurred to safeguard the interest of theassessee company and accordingly allowed as adeduction in the hands of the assessee and thedisallowance of the balance 50% of the litigationexpenses are confirmed and accordingly the groundof Appeal of the assessee is partly allowed. 3. In view thereof, no substantial question of law is involved in the present matter, the same isonly a finding of fact. Accordingly, the Appealstands dismissed. (V.C.DAGA,J.) (DR.S.RADHAKRISHNAN,J.)