Judgment

GROVER, J.:- These appeals from a judgment of the Calcutta High Court have been brought by certificate under Section 66A (2) of the Indian Income-tax Act, 1922, hereinafter called the Act and involve a common question, namely, whether the law charges incurred in connection with the proceedings before the Investigation Commission were an allowable deduction in computation of the profits of the business of the assessee.

2. The facts in the first batch of appeals i.e. C. As. 1351-1353/68 may be stated. During the assessment years 1952-53, 1953-54 and 1954-55 the assessee, which is a public limited company, spent Rs. 3810/-, Rs. 1,42,377/- and Rupees 2,42,688/- for representing its case before the Investigation Commission relating to the past assessment years 1941-42 to 1947-48. These expenses which were termed as "general expenses" were claimed by the assessee as deduction under Section 10 (2) (xv) or in the alternative under Section 10 (1) of the Income-tax Act 1922, hereinafter called the Act . The Income-tax Officer disallowed the claim. His order was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. Thereupon the assessee moved the Tribunal under Section 66 (1) of the Act to state the case and refer the question of law arising out of its order. The Tribunal submitted a common statement of the case and referred the following question to the High Court:-

"Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the law charges incurred in connection with the proceedings before the Investigation Commission were not allowable deductions in computation of the profits of the business either under Section 10 (1) or under Section 10 (20 (xv) of the Income-tax Act, 1922?"

The High Court held that the expenditure incurred by the assessee in opposing an illegal and coercive Government action with the object of saving taxation and safeguarding the business was justified by commercial expediency and was an allowable expenditure.

3. It is necessary at this stage to notice the purpose of the Taxation of Income (Investigation Commission) Act 1947, hereinafter called the Investigation Commission Act as also some of its relevant provisions. That Act was enacted for the purpose of ascertaining whether the actual incidence of taxation on income was and had been in recent years in accordance with the provisions of law and the extent to which the existing law and procedure for the assessment and recovery of such taxation was adequate to prevent the evasion thereof and to make provisions for investigation into such matters. Sections 5 (1) conferred power on the Central Government to refer particular cases or points to the Commission for investigation and report if the Government was of the opinion that there had been substantial evasion of payment of Income-Tax in such cases. If in the course of investigation the Commission had reasons to believe that some person other than the one whose case was being investigated had avoided payment of Income-Tax the Commission was authorised under sub-section (4) of Section 5 to report to the Central Government. The ultimate object of invstigation was collection of material showing evasion of tax so that the avoided income could be subjected to taxation and penalties imposed for evasion. Section 5 (1) of the Investigation Commission Act was struck down by this Court as unconstitutional in Shree Meenakshi Mills Ltd., Madurai v. A. V. Viswanatha Sastri 26 ITR 713. Similarly Section 5 (4) was declared to be void and unconstitutional in Surajmal Mohta and Co. v. A. V. Viswanatha Sastri, 26 ITR 1

4. As a result of investigation into the affairs of Birla group of concerns the case of the assessee was referred to the Commission while it was functioning for investigation. The assessee engaged eminent lawyers and incurred the expenses in question in conducting appropriate proceedings before the Commission as also in courts where the vires of the