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2005 (12) TMI 449 - AT - Income TaxLease rent income - Income from other sources - disallowance - whether such expenses are incurred wholly and exclusively for the purpose of earning the income - HELD THAT:- The perquisites payable to the Managing Director and vehicle expenses for the motorcar used by Managing Director are allowable as expenses incurred wholly and exclusively for earning the income. If the Company is to earn the income, it has to incur such expenses. It has to maintain its office. Accordingly, security charges are also to be paid. For maintaining the office, the power, fuel and water charges are to be incurred. The office is to be repaired and kept in useful condition. Thus, the repairs and renewal expenses are also required to be incurred. Similarly, for corres-pondence, stationery and printing expenses are also to be incurred. When the staff is to be employed, they are to be provided with welfare activities. To maintain the office in its proper decorum, flowers and plants are to be put therein or nearby. The assessee has also to entertain its guests or the officials from the lessee. Hence, such entertainment expenses are also inevitable and is to be considered as incurred wholly and exclusively for earning the income. The assessee has also to visit places and hence, vehicle has to be maintained. Similarly, the assessee has also to communicate with several agencies as well as the lessee. For this purpose, telephone, telex expenses are also to be incurred. Other general expenses like advertisement, interest on purchase of car, rent for executive’s residence are also spent out of necessity to indirectly facilitate or earning of the income. Insurance is also necessarily to be paid to effectively safeguard the assets. When the expenses are incurred which are either under compulsion or obligatory on the ground of commercial expediency, it is not for Assessing Officer to decide as to what can be the reasonability or necessity for the same. What is to be seen is whether such expenses are incurred wholly and exclusively for the purpose of earning the income. Hon’ble Supreme Court in the case of CIT v. Rajendra Prasad Moodi [1978 (10) TMI 133 - SUPREME COURT] held that it is not necessary that income should be derived in the year under consideration. Even though income is not received, yet if the expenses are incurred for earning the income, the same are allowable u/s 57(iii) of the Act. We accordingly hold that the expenses claimed by the assessee for these years are to be allowed u/s 57(iii) of the Act. None of the expenses can be classified as not incurred wholly and exclusively for the purpose of earning the income. It is seen that though the income is assessed under the head ‘Income from other sources’, the assessee was required to maintain its status as Limited Company and to incur certain necessary expenditure. Expenses for preserving and maintaining the source of income and the expenses were obligatory in nature. The same were on the ground of commercial expediency in order to indirectly facilitate the earning of income. Thus, there is some connection, direct or indirect, between the expenditure incurred and income earned and hence, the expenditure are to be allowed. The expenses incurred are legitimate and bona fide, which is not doubted by the Assessing Officer. The assessee had no option except to incur the expenditure and hence, the same are allowed. We accordingly direct the Assessing Officer to allow the expenses claimed as they are incurred wholly and exclusively for the purpose of earning such income. In the result, the appeals of assessee are partly allowed and the appeals of revenue are dismissed.
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