Judgment Uday Sinha, J. 1. These are four references under Sec.256(1) of the Income-tax Act, 1963, and relate to the assessment years 1965-66 and 1966-67. The questions referred to us for our opinion are the following : "(1) Whether, on the facts and in the circumstances of the case, the claim of the assessee-company amounting to Rs. 19,39,205 for the assessment year 1965-66 and Rs. 2,99,089 for the assessment year 1966-67 in respect of the internal development expenditure could be allowed as revenue expenditure ? (2) Whether, on the facts and in the circumstances of the case, the expenses of Rs. 2,000 and Rs. 7,319 for the assessment year 1965-66 and Rs. 5,017 and Rs. 2,195 for the assessment year 1966-67 incurred in defending the employees in connection with criminal cases are admissible expenses ? (3) Whether, on the facts and in the circumstances of the case, the assessee was entitled to export profit rebate in respect of the kyanite business in the assessment years 1965-66 and 1966-67 ? (4) Whether, on the facts and in the circumstances of the case, the losses of Rs. 80,933 in the assessment year 1965-66 and Rs. 25,500 in the assessment year 1966-67 claimed by the assessee on the purchase and sale of securities and bonds could be allowed as business loss ?" 2. The assessee is a public limited company. The first and third questions, quoted above, fell for consideration before this very Bench in Taxation Cases Nos. 185, 186, 205 and 206 of 1971 and 57 and 58 of 1972. [CIT V/s. Indian Copper Corporation Ltd. [1986] 161 ITR 327 (Pat)]. Those cases related to this very assessee-company and were disposed of on January 23, 1986. One of the questions referred to us in Taxation Cases Nos. 205 and 206 of 1971 was whether, on the facts and in the circumstances of the case, the claim of Rs. 14,43,524 in respect of internal development expenses was revenue expenditure. Those cases related to the assessment year 1962-63. The first question referred to us in these references is the very same matter, viz., whether internal development expenditure could be allowed as revenue expenditure. The question of allowance of internal development expenses was considered on pages 353 to 356 of the judgment. Those cases related to the assessment year 1962-63. The first question referred to us in these references is the very same matter, viz., whether internal development expenditure could be allowed as revenue expenditure. The question of allowance of internal development expenses was considered on pages 353 to 356 of the judgment. On page 356, it was held that the Tribunal had rightly held that the internal development expenses were revenue expenditure and rightly allowed deductions accordingly. Since the question has already been answered by this court in regard to the assessee before us and since nothing has been brought to our notice to doubt the correct ness of the view taken by us earlier, it has to be held that internal development expenditure to the tune of Rs. 19,39,205 during the assessment year 1965-66 and Rs. 2,99,089 during the assessment year 1966-67 is allowable expenditure. Question No. (1) is thus answered in favour of the assessee and against the Revenue. 3. The third question referred to us in regard to entitlement to export profit rebate in respect of the kyanite business during the assessment years 1965-66 and 1966-67 has also been decided by us in the aforesaid taxation cases of this very assessee. The precise question referred to us in this behalf had been referred by the Tribunal in Taxation Cases Nos. 205 and 206 of 1971. This question was answered in the earlier taxation cases where Nazir Ahmad J. held as follows (p. 362 of 161 ITR) : "From the aforesaid facts, it is evident that it is not in dispute that the assessee is entitled to export profit rebate in respect of the kyanite business for the assessment year is question, i. e., 1962-63. The actual dispute between the parties was with respect to the method of computation of export profit rebate." 4. Since the real point at issue was the method of computation of the export profit rebate, the question referred to us was refrained as follows (p. 363 of 161 ITR): "Whether, on the facts and in the circumstances of the case, the assessee is entitled to export profit rebate in respect of the kyanite business for the assessment year 1962-63 in the manner as computed by the Income-tax Officer or in the manner as computed by the Tribunal ?" 5. In that connection, it was laid down by this court that the total sales of kyanite business and the profit relating to the total sales of kyanite business, total export sales and the total profit on export sales of kyanite business have only to be considered for application of Rule 2(3) of the Income-tax Rules. On that basis, the Tribunal had directed the Income-tax Officer to compute the rebate. We uphold the mode of computation adopted by the Tribunal. And we do so now once again. Question No. 3 is answered accordingly in favour of the assessee. These conclude our opinion on questions Nos. 1 and 3 referred to us. Both of them are decided in favour of the assessee and against the Revenue. 6. The second question referred to us relates to the claim of expenditure over defending the directors and the employees against criminal prosecu" tions. The assessee spent Rs. 2,900 and Rs. 5,017 during the assessment years 1965-66 and 1966-67, respectively, in defending the directors in a criminal prosecution under the Mines Act. The prosecution had been initiated by the State on account of an accident that had occurred in North Badala section of its mines at Mosabani on August 17, 1953. Another category of expenditure was Rs. 7,319 and Rs. 2, 195 spent in 1965-66 and 1966-67, respectively. These expenditures were incurred for defending the watchmen and other employees of the assessee, who had been posted to guard its premises against hooligans and thieves. The question relating to legal expenses, therefore, had to be tackled from two different angles. The first category is of defending the directors. The other is on account of defending the employees of the assessee. The deductions were claimed as expenditure expended wholly and exclusively for the purposes of the business. Sec.37 of the Income-tax Act, 1961, enjoins that any expenditure expended wholly and exclusively for the purposes of the business shall be allowed in computing the income for the purposes of the business. The expenditure has to be wholly and exclusively for the purposes of the business. Judged by these standards, I have not the least doubt that the sums spent by the assessee in defending its watchmen and other employees was allowable deduction. Those were cases where the night watchmen had fired on hooligans. Those incidents led to prosecution of the employees of the company. Judged by these standards, I have not the least doubt that the sums spent by the assessee in defending its watchmen and other employees was allowable deduction. Those were cases where the night watchmen had fired on hooligans. Those incidents led to prosecution of the employees of the company. The company was under an obligation to defend the employees. The watchmen had been engaged to watch the properties of the assessee. Their duty forced them to such a situation that they had to face criminal prosecution. It cannot, therefore, be doubted for a moment that the expenditure over defending the employees was expenditure expended wholly and exclusively for the purposes of the business. The matter is so well settled that it is not necessary to refer to authorities on this point. I would, therefore, refer only to the case of Rohtas Industries Ltd. V/s. CIT [1968] 67 ITR 361, which is a decision of this court. That was a case where the directors and the principal officers were prosecuted under the Essential Supplies Temporary Powers Act, on the allegation that the vegetable oil produced by the company did not contain 5% til oil as required by the order made under Clause (9) of the Act. The company incurred expenditure in defending the case of the officers who were acquitted. In the assessment proceedings, the Rohtas Industries claimed deduction of expenses spent over that litigation in defending its officers under Sec.10(2)(xv) of the Indian Income-tax Act, 1922. This court observed that the nature and purpose of the legal proceeding was in relation to the quality and standard of the manufactured goods of the company. The prosecution was on the ground that those goods were below the standard and the company had to defend the quality of their products by defending themselves and their officers in that criminal case. In those circumstances, the goodwill and the quality of the goods were at stake. It had to be defended and protected. Their Lordships, therefore, held that the expenditure was deductible under Sec.10(2)(xv) of the Act. The present case also must be decided on the ratio of the said case. It cannot be doubted for a moment that the expenses had been incurred wholly and exclusively for the purposes of the business of the assessee. It had to be defended and protected. Their Lordships, therefore, held that the expenditure was deductible under Sec.10(2)(xv) of the Act. The present case also must be decided on the ratio of the said case. It cannot be doubted for a moment that the expenses had been incurred wholly and exclusively for the purposes of the business of the assessee. Later, the Supreme Court laid down in CIT V/s. Dhanrajgirji Raja Narasingirji [1973] 91 ITR 544, that the crucial question to be seen is whether the expenditure was bona fide incurred wholly and exclusively for the purpose of the business. For the academic legal question, their Lordships relied upon an earlier decision of the Supreme Court in CIT V/s. Birla Cotton Spinning and Weaving Mills Ltd. [1971] 82 ITR 166. The above should have concluded the matters, but I cannot resist my temptation of referring to another case of the Calcutta High Court in Parshva Properties Ltd. V/s. CIT [1976] 104 ITR 631. That was a case of an accident in a quarry. A labourer engaged in it had died in the accident. The director, the agent and manager of the company were prosecuted and sentenced. It had been found in the criminal case that the working of the mine was defective and the accident took place because of the failure to comply with the regulations 38 and 40 of the Indian Metalliferous Mines Regulations, 1926. A sum of Rs. 17,057 was alleged to have been incurred in defending the criminal proceedings. That amount included Rs. 3,000 paid as fine. The Tribunal rejected the claim to deduction of the said sum as sums spent wholly and exclusively for the purpose of the business of the company. On a reference, Sabyacachi Mukharji J., laid down some principles which emerged from the decided cases. His Lordship laid down that the question of deductibility of expenditure of that nature must depend on the purpose and nature of the expenditure incurred. Secondly, it had to be found out in what capacity the expenditure was incurred and, lastly, the ultimate result or decision in which the expenses were incurred would not in any way affect the question of allowability of the expenditure. Secondly, it had to be found out in what capacity the expenditure was incurred and, lastly, the ultimate result or decision in which the expenses were incurred would not in any way affect the question of allowability of the expenditure. In regard to sums spent in defending the directors, their Lordships of the Calcutta High Court observed that in so far as the expenses were incurred in defending the accused persons in respect of the acts alleged to have been committed in the course of employment of the assessee while carrying on the business of the assessee, unless it could be said that the expenditure was not incurred bona fide, which was not the "ase there, the expenditure should be allowed in computing the total income of the assessee. Their Lordships, however, laid down that the sum of Rs. 3,000 paid as fine could not be allowed as deduction. I am in respectful agreement with the views of Mukharji J. I am, therefore, of the view that the sums spent over defending the employees from criminal prosecution, i. e., the sums of Rs. 7,319 and Rs. 2, 195 incurred in the assessment years 1965-66 and 1966-67, were allowable deductions. 7. Learned senior standing counsel for the Income-tax Department relied upon CIT v. H. Hirjee [1953] 23 ITR 427, in which the Supreme Court rejected the claim for deductions on account of legal expenses. That was a case where the directors of the assessee were prosecuted under the Hoarding and Profiteering Ordinance, 1943, on the charge of selling goods at higher prices than were reasonable in contravention of the provisions of Sec. 6 thereof. The respondent defended the cases. The expenditure spent in defending the prosecution which had ended in acquittal was claimed as allowable deductions. The legal expenses as allowable deductions was rejected by the Supreme Court, In my view, the case of H. Hirjee [1953] 23 ITR 427 (SC) was decided on a different footing. That decision proceeded on the footing that the directors were charged with contravention of Section 6 of the Hoarding and Profiteering Ordinance, 1943, which prohibited the sale by a dealer or producer of an article for consideration which was unreasonable. Their Lordships repelled the reasoning of the High Court that since the prosecution had ended in acquittal, the expenses were legally deductible. Their Lordships repelled the reasoning of the High Court that since the prosecution had ended in acquittal, the expenses were legally deductible. Their Lordships held that there was chance of conviction as well and, therefore, the question of acquittal or conviction was entirely foreign to the matter in controversy. In this behalf, I can do no better than state that the present case must be decided on the ratio of the Supreme Court decision in Haji Aziz and Abdul Shakoor Bros. V/s. CIT [1961] 41 ITR 350. Learned counsel for the Revenue placed reliance upon CIT V/s. Chaman Lal and Bros. [1970] 77 ITR 383 (Delhi), Lakshmi Narayan Gouri Shankar V/s. CIT [1975] 100 ITR 143 (Pat), Raghubir Prasad Gupta V/s. CIT [1979] 120 ITR 789 (Cal) and CIT V/s. Malwa Vanaspati & Chemical Co. [1982] 135 ITR 221 (MP), to impress upon us that expenses over criminal prosecution are ex facie not deductible expenditure. These cases stand on a different footing. Those were cases of penalty or fine under a special enactment. Those were not cases of prosecution. The real question which must decide the issue is whether expenses were incurred in defending prosecutions which were wholly and exclusively for the business of the assessee. In the present case, I am clearly of the view that the sums spent over defending the employees were allowable deductions in terms of Section 87 of the Act. 8. I must now come to the question whether the sums spent for defending the director from prosecution under the Mines Act was allowable deduction. In this behalf, it was submitted by learned senior standing counsel that the assessee had failed to produce necessary and relevant materials to show that the expenditure was wholly and exclusively in the interests of the business of the assessee. He submitted that there was nothing to show in what circumstances the accident had occurred and what was the infraction of the law by the assessee. The law is that sums spent wholly and exclusively in the interests of the business must be allowed as a deduction. The finding of fact recorded by the Tribunal is that there had been an accident in a mine of the assessee. The law is that sums spent wholly and exclusively in the interests of the business must be allowed as a deduction. The finding of fact recorded by the Tribunal is that there had been an accident in a mine of the assessee. The Tribunal, however, has not recorded the circumstances in which the accident had taken place and what were the part played by the assessee or, to put it in other words, what were alleged to be the failing of the directors. In the absence of those materials, it would be difficult to hold that the sums were spent wholly and exclusively for the business of the assessee. The assessee failed to produce the necessary materials in this behalf. Merely saying that some amounts were spent in defending the directors from criminal prosecution under the Mines Act is not enough. The law does not have any bias or favour for persons infringing the law and in endangering the life of the citizens. In that view of the matter, the assessee was required to show the circumstances in which the accident occurred and that the directors had interest in defending the good name of the company. In the absence of necessary materials, the sums allowed in defending the directors were not allowable deductions. However, it was contended on behalf of the assessee that the Tribunal had found that those expenses were in proceedings arising out of and were incidental to the assessees business. This was a finding of fact and, therefore, this court in a reference under Section 256(1) of the Act had no jurisdiction to take another view of the matter and hold that the expenses were not wholly and exclusively for the purpose of the business. I regret, I have some difficulty in holding that this was a finding of fact. The Tribunal appears to proceed upon the assumption that the moment the assessee asserts that expenditure was incurred for defending the directors in a criminal prosecution, the deduction must be allowed. I do not think that is the law. It will have to be seen on the facts of each case whether the expenditure was in the interests of the business or whether it was in the interests of an individual. In that view of the matter, I am of the view that Rs. 2.000 and Rs. I do not think that is the law. It will have to be seen on the facts of each case whether the expenditure was in the interests of the business or whether it was in the interests of an individual. In that view of the matter, I am of the view that Rs. 2.000 and Rs. 5,017 spent in 1965-66 and 1966-67, respectively, were not allowable deductions. The answers to question No. (2) must be that the expenses over defending the watchmen and other employees were allowable deductions, but the expenses over defending the directors from prosecution under the Mines Act were not allowable deductions. Question No. (2) must, therefore, be answered accordingly. 9. Question No. (4) relates to certain losses incurred by the assessee as capital losses. The position in this regard is that the assessee purchased the Bihar State Development Bonds and sold them on the very same day. In both the assessment years, these purchases and sales caused loss to the assessee. In this behalf, it would be relevant to quote the findings of the Appellate Assistant Commissioner which is annexure B-1 to the statement of the case: " At the instance of the Government of Bihar, the appellant was made to purchase the following development loans : (a) On 24-8-1964 4-3/4% Bihar State Development Loans, 1976--Rs. 10,86,540. (b) On 19-11-1963 4-3/4% Bihar State Electricity Board Bonds 1975 --Rs. 4,60,187. (c) On 16-11-1964 5% Bihar State Electricity Board Bonds 1976 --Rs. 4,97,500. Soon after the purchase, the appellant sold No. (a) on August 24, 1964 (same date on which it was purchased) for Rs. 10,53,780. It was sold at a loss of Rs. 32,760. The appellant sold No. (b) on November 16, 1964, for Rs. 4,33,594. There was a loss of Rs. 26,593. The appellant sold No. (c) on November 16, 1964 (same date on which it was purchased) for Rs. 4,75,750. It incurred a loss of Rs. 21,750. All these sales were to outsiders. Low price was fetched because the quotation was low in the market. The appellant had not purchased these securities with a view to investment. On the other hand, it was made to purchase them by the Government of Bihar. That the appellant did not think of investment is evident from the fact that from all the securities two have been sold on the same date on which they were purchased. The appellant had not purchased these securities with a view to investment. On the other hand, it was made to purchase them by the Government of Bihar. That the appellant did not think of investment is evident from the fact that from all the securities two have been sold on the same date on which they were purchased. It appears to me that the purchase and sale was not in connection with the appellants business." 10. From the above findings, it will be seen that the purchases and sales were anything but commercial ventures. These bonds were available in the market for much lower sums. It was known that the price which the bonds would fetch on sale was much lower than the investment and yet knowing all these, the company went into that venture. It is difficult to appreciate how such an expenditure can be held to be wholly and exclusively in the interests of the business. The Tribunal in a very glib and cryptic manner accepted the stand of the assessee observing that the very fact that they were sold shortly after they were purchased in a way indicate that the purchases were made only to oblige others. It is difficult to comprehend whether it was meant to oblige others or it was meant to oblige the powers that be under the assessee-company. It may be a convenient way of cornering the profits of the company. The Tribunal has not gone into the question as to whom these assets were sold. The Appellate Assistant Commissioner did hold that these sales were to outsiders but "outsider" is too vague an expression. These "outsiders" may well be sons, nephews and other relatives. Merely saying that the sales were to outsiders is insufficient material to hold that they were genuine sales and purchases. 11. The Tribunal allowed the deduction on the finding that the purchases were only to oblige others. Even upon this finding, it can hardly justify allowance of such an expenditure. The assessee did not disclose who had applied pressure nor did he disclose what was the kind of pressure applied. There is nothing to show what would have happened if the company had not succumbed to the pressure. Supposing these sales were meant as bribe to any high ranking officer of the Government, would that be deemed to be an investment in the interests of the business. There is nothing to show what would have happened if the company had not succumbed to the pressure. Supposing these sales were meant as bribe to any high ranking officer of the Government, would that be deemed to be an investment in the interests of the business. In my view, the law cannot be twisted or interpreted to give encouragement to corruption and malpractices in the garb of pressure from the Government. By succumbing to such pressure, the assessee became particeps criminis. I am unable to hold that from the mere assertion of the assessee that these losses were known before the transactions and yet they were gone through to oblige somebody in the Government was adequate ground for allowing the deductions. A court of law cannot take note of illegal pressure. Every citizen is supposed to resist the demand for bribe. If this view of the law is accepted, it would open the case for bribing officers and political dignitaries. It is this sort of interpretation by court which encourages political dignitaries to demand bribe. When the persons subjected to the bribe express their inability saying what will they show in the accounts, they are met with the rebuff "that is your concern, not mine". It would be putting a premium on corruption by powerful elements. 12. Learned counsel for the assessee placed reliance in support of his stand on CIT V/s. Dhandayuthapani Foundry (Private) Ltd. [1980] 123 ITR 709 (Mad). That was a case where the assessee was obliged to subscribe to certain Government securities. This was done on the persuasion of the sales tax authorities who were making assessments on the assessee and also had the control over Form No. XX which are delivery notes to be issued at the time of despatch of goods by the assessee. The assessee instead of directly purchasing the securities and then selling them later paid certain marginal amounts to the brokers which represented the difference between the issue price and the market price for the securities. The brokers purchased on behalf of the assessee and sold them immediately. The result was a loss of Rs. 1,900. The assessee claimed this as revenue loss. The Tribunal upheld that stand on the footing that the assessee purchased and sold the securities for retention of the goodwill of the Sales Tax Department. The brokers purchased on behalf of the assessee and sold them immediately. The result was a loss of Rs. 1,900. The assessee claimed this as revenue loss. The Tribunal upheld that stand on the footing that the assessee purchased and sold the securities for retention of the goodwill of the Sales Tax Department. On that footing, the loss was allowed as a loss incidental to the business of the assessee. That was a case where it was obvious that submission to the pressure was necessary in order to obtain Form No. XX without which goods could not have been despatched. That decision should be read carefully to follow the ratio From the facts, it was obvious that in that case nexus was established between the act of the assessee and the pressure or persuasion applied by the Department. If the nexus can be established between the two, it is obvious that the expenses would be in the interests of the business. That is not the situation before us. The real problem in accepting the submission urged on behalf of the assessee is that nothing has been spelt out about the nature of the pressure or the source of the pressure. 13. In this connection, it would be useful to advert to a Full Bench decision of the Madhya Pradesh High Court in Addl. CIT V/s. Kuber Singh Bhagwandas [1979] 118 ITR 379. Since this case has been relied upon heavily by learned counsel for the assessee, it would be apt to deal with this case at some length in order to show that it does not really help the assessee. The facts of that case are that there was a drought in the relevant assessment year in Madhya Pradesh. Twelve districts of the State of Madhya Pradesh were badly hit by famine. The export of foodgrains from those districts had, therefore, been banned by the Madhya Pradesh Gram (Export Control) Order, 1967, under the Essential Commodities Act. The Bhopal Vyapari Maha Sangh addressed a representation to the Food Minister to the effect that the production of pulses and gulabi chana was maximum in the State of Madhya Pradesh as compared to other States and that their stock was steadily deteriorating in quality because of want of market. The hardships of the mercantile community attracted the attention of the Chief Minister. The hardships of the mercantile community attracted the attention of the Chief Minister. He addressed a letter to the President of the Maha Sangh which stated that in view of the representation, the Government had decided to allow liberally permits for export of gulabi chana and pulses outside the State. In the same letter, the Chief Minister brought to the notice of the trading community that the kisans and labourers were undergoing untold hardship on account of drought conditions and as the merchants were bound to earn profits, the Chief Minister appealed to the trading community that they should contribute a portion of the profits to the Chief Ministers Drought Relief Fund which would be utilised for the purposes of relieving the distress of the famine-stricken people, for production of foodgrains and for small scale irrigation schemes. The Chief Minister, however, made it clear that there was no question whatsoever of exerting pressure on any one in the matter, and that he hoped that as the foodgrain merchants of the State never Jagged behind in generosity, his appeal would receive generous response. The joint secretary of the Maha Sangh wrote to the constituents asking the merchants to deposit Rs. 30 per quintal for the export of gulabi chana and Rs. 5 per quintal for the export of pulses into the State Bank of India or the State Bank of Indore to the credit of the "Chief Ministers Drought Relief Fund" and obtain duplicate receipts from the bank. It was also directed that the original of such receipts were to be sent along with the duly filled in application forms for permits to the Maha Sangh at Bhopal and in case any bank refused to issue duplicate receipts, a bank draft for the amount should be obtained in the name of the Chief Ministers Drought Relief Fund and the application for permit with the draft should be sent to the Maha Sangh at Bhopal. The assessee also contributed to the Drought Relief Fund and obtained the permit. In the assessment, the assessee claimed deduction of the amount contributed to the Chief Ministers Drought Relief Fund. The Tribunal upheld the stand of the assessee that the expenditure had been incurred for the purposes of the business. On a reference at the instance of the Commissioner, the High Court upheld the stand of the assessee and rejected that of the Commissioner. The Tribunal upheld the stand of the assessee that the expenditure had been incurred for the purposes of the business. On a reference at the instance of the Commissioner, the High Court upheld the stand of the assessee and rejected that of the Commissioner. The High Court held that the contribution was an allowable deduction. On the face of it, the decision seems to support learned counsel for the assessee. A proper appreciation is, however, required. The Madhya Pradesh High Court noticed four aspects in upholding the claim for deduction. They are rather important. The first aspect was that the Government was prepared to grant the permits only when the Maha Sangh speaking for the trading community offered its services for the benefit of the public. The procedure which was followed in obtaining a permit had direct relationship with the quantity of food-grains for which the permit was applied for and granted. There was thus clear nexus between the expenditure and the object. Legally, the traders were not bound to make the contribution, but the traders realised that there was greater prospect of getting a permit for carrying on the export business in case they made the donations as requested by the Chief Minister. The donations were thus made as a matter of fact for commercial necessity which facilitated getting permit for carrying on the export trade. To quote the words of G. P. Singh C.J. (p. 388): "the expenditure had a direct connection with the permit, as the receipts of donations were attached with the applications for permits and permits were granted in proportion to the donations". The second aspect noted therein is that the object behind the donations was to obtain permits for business to enable the assessee to earn profits by exporting and selling gram in the neighbouring States where the price of the commodity was double of what it was in the State. The expenditure was thus incurred wholly and exclusively for purposes of business. The third noteworthy aspect in that decision is that the traders did not contravene any law. The donations were not made as penalty for infraction of any law. The fourth aspect was that the donations were made to obtain permits as also to earn profits. They were not made subject to any condition that they would be refunded if the merchants did not make any profit. The donations were not made as penalty for infraction of any law. The fourth aspect was that the donations were made to obtain permits as also to earn profits. They were not made subject to any condition that they would be refunded if the merchants did not make any profit. They were made before making the application for permit. They were, therefore, not made out of the profits. The last noteworthy aspect was that the mere fact that the donations were voluntary and that some members got permits even without making donations was not crucial for determining whether the donations constituted business expenditure allowable under Sec.37(1) of Act. 14. Let us test the case before us in the light of the decision of the Madhya Pradesh High Court. The first aspect to which I would like to advert is that on the facts as found, do we know why the pressure was applied ? The second aspect was, is there any material to show that the company benefited or was likely to benefit ? The third aspect is, there is no material to indicate whether the investments were made to violate any law. Purchases and sales of the bonds themselves were not against law, but if they were meant as bribe, would it not be against law ? Would the donations not be said to have been made in infraction of any law ? Is there anything to show that the assessee benefited by the purchase and sale of the bonds ? The answer to all these quesions must be "we do not know", since there is no material in this behalf. For all these reasons, the Full Bench decision of the Madhya Pradesh High Court can be of no help to the assessee. If the assessee intended to take advantage of Sec.37(1) of the Act, some more materials were required. The ratio of that case really goes against the assessee. 15. Learned counsel for the assessee relied upon Addl. CIT V/s. B. M. S. (P.) Ltd. [1979] 119 ITR 321 (Mad). This was also a case of purchase and sale of Government bonds which brought about loss to the assessee. The losses were allowed as deductible expenditure. This case is again distinguishable because the nexus between the investment and the loss was obvious. The trouble in our case is that the nexus has not been established. This was also a case of purchase and sale of Government bonds which brought about loss to the assessee. The losses were allowed as deductible expenditure. This case is again distinguishable because the nexus between the investment and the loss was obvious. The trouble in our case is that the nexus has not been established. The nexus has not even been alleged much less established. In that view of the matter, I am of the view that the losses incurred by the assessee were not business losses. The expenditure cannot be held to have been incurred wholly and exclusively for the purposes of the business. In my view, therefore, the Tribunal was not right in allowing the sum of Rs. 80,933 in the assessment year 1965-66 and Rs. 25,500 in the assessment year 1966-67 as business losses. Question No. (4) must, therefore, be answered in favour of the Revenue and against the assessee. 16. In fine, questions Nos. (1) and (3) are answered in favour of the asses-see and against the Revenue in terms of our decision in Taxation Cases Nos. 185, 186, 205 and 206 of 1971, disposed of on January 23, 1986 (CIT V/s. Indian Copper Corporation Ltd. [1986] 161 ITR 327), Question No. (2) is answered in favour of the assessee so far as expenses over defending the employees of the assessee are concerned, but it is answered in favour of the Revenue and against the assessee so far as the expenditure over defending the directors in the prosecution under the Mines Act is concerned. Question No. (4) is answered against the assessee and in favour of the Revenue. In the special facts and circumstances of the case, there shall be no order as to costs. 17. Let a copy of this judgment be transmitted to the Income-tax Appellate Tribunal in terms of Sec.260 of the Income-tax Act, 1961. Nazir Ahmad, J. 18 I agree.