JUDGMENT
Rajesh Balia, J.
1. Four statements of cases were submitted by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, relating to the assessment years 1964-65 to 1967-68 arising out of the assessments made in the case of the same assessee. In each case two questions have been referred for the opinion of this court as the same were questions of law arising out of the common order passed by the Tribunal in respect of four appeals separately filed for each assessment year. However, as the questions involved in all these cases were identical, except that the amount in respect of which deduction was claimed and disallowed is different in each case, on the same set of facts they were consolidated and registered as one I. T. Reference No. 2 of 1980. Instead of repeating the questions of facts of each case separately, we shall confine the reference to the statement of case in respect of the assessment year 1964-65.
2. This reference has been submitted at the instance of the assessee, who was unsuccessful in his claim for deduction in respect of different amounts paid during the previous years relevant to each assessment year to one Lehini Bai, widow of Binnumal. The assessee has claimed that the amount paid to Lehini Bai were the expenses incurred wholly and exclusively for the purpose of carrying on his business and were allowable as deduction in computing his income during each relevant assessment year.
3. According to the assessee, one Binnumal was an employee in the business of the assessee carried on in the name of Vakil and Co. The said Binnumal died on November 13, 1956, and after his death his widow, Smt. Lehini, took away the books of account of the business. A dispute ensued. In the absence of such account books, it was difficult for the assessee to carry on his business and ultimately the matter was referred to the arbitrator and the assessee had to make payment of Rs. 65,000 spread over the
four years in question. The assessee claimed that the said expenses were incurred wholly and exclusively for the purpose of carrying on his business. The said claim of the assessee was disallowed by the assessment authority as well as by the Appellate Assistant Commissioner of Income-tax and also by the Tribunal on the ground that the payment of the said sum cannot be said to be expenses incurred wholly and exclusively for the purpose of carrying the business. Alternatively, the Tribunal has observed that even if such payment can be said to be expenses wholly and exclusively for the purpose of carrying on his business, the same relates to 1956. As the assessee was maintaining his books of account on the mercantile system, it could have been considered only in the year in which the liability arose.
4. Aggrieved by the Tribunal’s order dated July 31, 1975, the assessee has moved the applications under Section 256(1) of the Income-tax Act, 1961, which were allowed and the following questions of law have been referred to this court for its opinion arising out of the Tribunal’s appellate order : “(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 10,000 paid to the widow of the late Shri Binnumal in respect of the assessment year 1964-65 was not incurred wholly and exclusively for the purpose of the business ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the liability in question arose in the year 1956 and as such the expenditure if any should have been claimed by the assessee in the assessment year relevant to the year 1956 ?”
5. Heard learned counsel for the parties.
6. Learned counsel for the assessee has urged that since the expenses were incurred for the purpose of carrying on his business inasmuch as Lehini Bai has deprived the assessee of his books which were a business necessity in the absence of which it was not convenient to carry on the business, the expenses incurred for retrieving such books of account had causal connection with the carrying on the business of the assessee, and, therefore, ought to have been allowed as deductible expenses under Section 37 of the Income-tax Act, 1961. For the principles governing allowability of expenses under Section 37, reliance has been placed by learned counsel in the matter of Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC) and Sassoon J. David and Co. P. Ltd. v. CIT [1979] 118 ITR 261 (SC).
7. Learned counsel for the Revenue has urged that the basic premise for the contention advanced by learned counsel for the assessee is non-existent and therefore it cannot be accepted inasmuch as there is no evidence to support the basic premise nor is there a finding that these expenses related to retrieving of lost books of account which were retained in the possession of the widow of Shri Binnumal but it was a simple case of repayment of a debt to Smt. Lehini by the respondent which was disputed by him.
8. A perusal of the order as well as material relating to the subject of the existing dispute between the assessee and Smt. Lehini Bai, widow of Binnumal, justifies the contention raised by learned counsel for the Revenue.
9. The Tribunal has referred to the terms of the agreement between the assessee and the said Lehini Bai for referring their dispute to an arbitrator, the award passed thereon, and the decree of the court by which the award was made rule of the court and reached a finding that there is no material that may even suggest that the sums in question were the expenses incurred wholly and exclusively for the purpose of carrying on business. The said Binnumal, was an employee of Vakil and Co., the name in which the assessee carried on business. He has a advanced certain sum by way of loan to the assessee. While working as manager Shri Binnumal died on November 13, 1956. After his death, some dispute arose between the assessee and the widow of Shri Binnumal about the repayment of said money advanced to the assessee which was ultimately referred to an arbitrator for settlement by mutual agreement. In pursuance of which an award was given and the same was made rule of the court. Some other litigation was also pending between the parties. Ultimately, the assessee had to make the payment as per decree to Smt. Lehini Bai. Thus, the payment made by the assessee to the lady was not on account of the fact that the lady has taken away the account books of the business without any basis. The books, etc., were taken by the lady because the assessee had failed to pay the amount which was advanced by her husband to the business.
10. This finding is fully supported by the terms of reference, on which the arbitrator made an award and ultimately it was made rule of the court. The agreement of arbitration reads as under :
“… and whereas disputes and differences are now between the parties regarding the said monies and claims on behalf of Seth Binnumal C. Rewamal, inter alia, on the following grounds :
(a) what is the amount actually payable by the proprietor to Seth Binnomal C. Rewamal’s legal representative,
(b) who are the legal representatives of Seth Binnomal C. Rewamal, (c) how is the amount to be paid, if any, and to whom and on what conditions, and
(d) miscellaneous matters such as pending suits, kiosks, etc.” From a perusal of the aforesaid terms of reference, it is clear that the dispute related to the outstanding money and not to the retention of the books of account by Smt. Lehini. No existence of such dispute finds a mention.
11. It was found by the arbitrator that the money due from the assessee to the late Binnumal was on account of money advanced to the assessee. No part of the award refers to payments on account of the litigation expenses incurred or a settlement arrived at between the parties settling all the disputes without determination on the merits. Such repayment of debt obviously could not have been claimed as revenue expenses wholly and exclusively for the purpose of the business.
12. These findings are all findings of fact and do not give rise to any question of law.
13. We, therefore, are of the opinion that on the face of it, in fact, no question of law arose out of the order of the Tribunal and as such ought not to have been referred to this court. Even otherwise having considered the same on the merits, we are in agreement with the Tribunal as discussed above. Accordingly, we answer question No. 1 in the affirmative, in favour of the Revenue and against the assessee.
14. In view of our answer to question No. 1 in the affirmative, question No. 2 is academic and does not call for any answer.
15. There shall be no order as to costs.
