Viswanatha Sastri, J.-The following question has been referred to us by the Income-tax Appellate Tribunal at the instance of the Commissioner of Income-tax:

“Whether on the facts and in the circumstances of the case, the litigation expenses of Rs. 1,392 incurred by the assessee company are allowable as business expenditure under section to (2) (xv) of the Income-tax Act”

The assessee is Raman and Raman, Ltd., a private limited company carrying on business at Kumbakonam in the Tanjore district and will hereafter be referred to as “the company”. The company owns a number of motor buses plying for hire in specific routes in the Tanjore district. Another bus service run under the name of Chamundeswari Bus Service had five buses plying between Kumbakonam in the Tanjore district and Karaikkal in the French territory. On 9th March, 1944, the company through its Managing Director entered into an agreement for the purchase of the five buses of the Chamundeswari Bus Service with one T.D. Balasubramania Pillai in whose name the buses were registered and the permits for running the buses on the routes specified therein stood. The material portion of the agreement was in these terms:

“The five buses owned by T.D. Balasubramania Pillai and detailed below have been purchased by Raman and Raman, Limited, for Rs. 31,001; on this date Raman and Raman, Limited, have paid Rs. 1,001 to T.D. Balasubramania Pillai. The Managing Director, P.S. Narayanan has agreed to pay the balance of Rs. 30,006, by giving on 15th March, 1944, a sum of Rs. 10,000 the remaining Rs. 20,000 to be paid by him within a week after the transfer of ownership of the said five buses and the relative route permits in his name. These five buses belong solely to T.D. Balasubramania Pillai and nobody else has absolutely any right whatever to these buses...... The tin shed in the Post Office Road where the five buses are now parked and which belongs to T.D. Balasubramania Pillai has now been sold for Rs. 700 to Raman and Raman, Limited . . . . . . The spare parts, accessories, lubricating oils, greases, batteries, tools, charcoal, etc., relating to the buses of T.D. Balasubramania Pillai will be listed and evaluated according to the current prices and taken over within three days by Raman and Raman, Limited, after paving their value. The undermentioned five buses have already been on this dale handed over by T.D. Balasubramania Pillai to P.S. Narayanan, the Managing Director of Raman and Raman, Limited.”

Then follows a detailed description of the five buses with their registration numbers and other particulars.

Pursuant to this agreement, the five buses were handed over to the company and they were plying for hire, on the Kumbakonam-Karaikkal route for about ten days. On the day following the agreement, that is, on 10th March, 1944, the Managing Director of the company and Balasubramania Pillai signed a joint application to the Secretary, Road Traffic Board, Tanjore, for the transfer of G. permits of the five buses to the name of the Company. The previous G permit for the buses standing in the name of the third defendant were delivered over to the company and they ran the bus service in the name of T.D. Balasubramania Pillai pending recognition of the transfer. The company made the necessary payments for the issue of fitness certificates in respect of these buses and by way of taxes. When the sum of Rs. 10,000 the first instalment of the price payable on 15th March, 1944, was tendered by the company to Balasubramania Pillai, the latter refused to accept the cheque tendered and put forward the plea that he had been cheated by the company into entering into the bargain. Moreover, one Veerappa Pillai filed a suit on the 3rd October, 1944, on the file of the Court of the Subordinate Judge of Kumbakonam claiming title to these five buses and seeking to recover possession of them on the ground that on 10th April, 1944, they had been sold to him by Balasubramania Pillai with the consent and e

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