CPT V24P7-Art1 (Content).pmd - Taxmann

Taxing the Expenditure
on Litigation: Adding
insult to injury?
INTRODUCTION
1. Business as a source of income yields profits
only at the cost of certain ‘expenditures’. Profits
and losses are like high and low tides in the
sea or the ups and downs in the life line
(health) of any business. The genius of the
economic machine is in its ability to convert
all indulgences into some benefit.
The provisions of section 28(i), read with section
29 of the Income-tax Act provide for
determination of “profits and gains of any
business or profession” carried on by the assessee
in accordance with the provisions contained
DIRECT TAX LAWS
PURUSHOTTAM ANAND
“When we can drain the Ocean into mill-ponds, and bottle up the Force of Gravity,
to be sold by retail, in gas jars; then may we hope to comprehend the infinitudes
of Profit and Loss; and rule over this too, as over a patent engine, by checks,
and valves, and balances.”
Thomas Carlyle1 in sections 30 to 43D. Section 37(1) is a specific
provision where deduction is provided for any
expenditure “laid out or expended wholly and
exclusively for the purpose of the business or
profession.”
Further, the Explanation to section 37(1) declares
that any expenditure incurred by an assessee
for any purpose which is an offence or which
is prohibited by law shall not be deemed to
have been incurred for the purpose of business
or profession and no deduction or allowance
shall be made in respect of such an expenditure.
Therefore, an expenditure cannot be allowed
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 25
645