Expenses incurred in defending employees in a criminal proceeding are deductible under Section 10(2)(XV) of the Indian Income-tax Act, 1922, if the aim and purpose of the expenditure is to protect the assessee's employees and thereby to protect the assessee's good name and to carry on the business.

SABYASACHI MUKHARJI, J.

( 1 ) IN this reference we are concerned with the question of deducibility of certain expenses incurred in relation to a criminal proceeding initiated against the officers of the assessee-company. The assessee is a private limited company and the assessment year involved is 1959-60. The business of the company was in quarrying lime-stone. The assessee-company also derived income from the property, letting on hire of furnitures, etc. One of the contentions urged before the Tribunal was that the Income-tax Officer and the Appellate Assistant Commissioner had erred in not allowing as deduction, expenditure to the extent of Rs. 17,057 alleged to have been incurred in defending certain employees of the company in a case which arose consequent to an accident which occurred in the mines. The amount of Rs. 17,057 included an amount of Rs. 3,000 which was paid as fine. In order to appreciate the question, it is necessary to mention that the accident occurred on the 25th April, 1957, when the labourers were engaged in a quarry of the assessee at Murlihills at two working faces, one below the other. The upper face was known as Pit No. 22 and the lower as Pit No. 10a. The latter was situate below the former pit, but extended slightly to the west of the upper pit. The labourers working in Pit No. 22 were removing the over-burden covering the time-stone to be quarried. These pieces of stone were being thrown at the site of the old dump which lay to the east of Pit No. 10a, two coolies of the upper face were throwing their loads down from near the edge of the eastern part of the upper pit. One Nagmtia, a woman worker, in the lower pit, was hit by a flying stone thrown by a cooly working in the upper pit as a result of which she died. Consequent to this incident, criminal proceedings were initiated against Haridutta Bishnoi, a director, Ramshankar Singh, agent of the company, and Fakirchand Maheswari, manager. These persons were convicted under Section 74 (1) (a) of the Indian Mines Act, 1952, for violation of regulations 38 and 40 of the Indian Metalliferous Mines Regulations, 1926, by the First Class Magistrate at Sesaram and sentenced to pay a fine of Rs. 1,000 each and in default to undergo simple imprisonment for a period of two months. The conviction and sentence were upheld by the additional district judge. A revision petition was preferred and the judgment of the High Court of Patna was delivered on 14th January, 1963. The petition was allowed in respect of Haridutta Bishnoi but was dismissed in respect of the remaining two persons.

( 2 ) IN appeal before the Tribunal, the Tribunal found that the woman worker died by a cooly throwing the over-burden from the upper face but the cooly was, however, throwing the over-burden from the near edge of the eastern part of the upper pit at the side of an old dump situate to the east of Pit No. 10a. The woman worker was working in Pit No. 10a and it had to be seen whether such an action on the part of the cooly could have resulted in the accidental death in-the normal course of business. The Tribunal noticed that one of the charges was that there were violations of regulations 38 and 40 of the Indian Metalliferous Mines Regulations, 1926. The Tribunal referred to the judgment of the High Court. Regulation 38 provides that the sides of the open workings shall be stopped, stepped or secured in such a manner as to prevent danger from fall of material. Regulation 40 provides that in open working trees liable to fall, the overburden and all loose ground and material shall be removed sufficiently far from the edge or otherwise made secure, in order to prevent danger to persons employed in mines. According to the assessee, there was no violation of these regulations. The assessee had contended, inter alia, that the regulations had not been framed according to law and were not valid. Secondly, the assessee contended that there was no legal evidence for the prosecution and it was a

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