TMI Blog1997 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... 766 and 1016 of 1986 for the assessment years 1979-80 and 1980-81 is as under: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in allowing the entire expenditure incurred by the assessee under section 57(iii) against the assessee's income under the head 'Other sources' ?" The assessee is a private limited company in liquidation represented by the official liquidator. The assessee during the said assessment years filed returns of income admitting nil income, as there was excess of expenditure over the income. The Income-tax Officer, however, determined the total income showing positive figure and the positive figure arose because of the disallowance of certain expenditure by the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal. The Appellate Tribunal upheld the orders of the Commissioner (Appeals) holding that the entire expenses were deductible against the income assessable under the head "Other sources", and dismissed the appeals preferred by the Revenue. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the Tribunal was not correct in holding that the expenditure incurred by the assessee towards establishment charges, rent, etc., should be allowed against the interest income assessable under the head, "Other sources", as it cannot be stated that the expenditure was incurred by the assessee for earning the interest income. He strongly placed reliance on a decision of the Supreme Court in the case of Vijaya Laxmi Sugar Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the company was engaged in construction business at various places in Southern States involving huge and substantial investment and engaged the services of the staff commensurate with the volume of work and incurred expenditure towards staff salary. In so far as the staff members are concerned, they were paid on consolidated basis but the watchman was paid on daily basis. It is seen that the watchman has necessarily to be employed for the protection and safety of the premises and the properties of the company and the staff were engaged in administering the affairs of the company. In so far as the payment of rent is concerned, the company had machineries, equipments and materials lying at various work sites and all the materials wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring expenditure, it would not have been possible to earn income by way of interest. The decision of the Supreme Court in Vijaya Laxmi Sugar Mills Ltd. v. CIT [1991] 191 ITR 641 is distinguishable on the facts of the case. In Vijaya Laxmi Mills Ltd's case [1991] 191 ITR 641, the Supreme Court held as under: "The question for consideration, therefore, is whether the expenses of the type incurred by the liquidator in this case can be said to have been incurred solely for the purpose of earning the interest income. It is true that the connection between the expenditure and the earning of income need not be direct and it may be indirect. But, since the expenditure must have been incurred for the purpose of earning that income, there should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve the assets and to maintain the source which yielded the income. The facts found by the Appellate Tribunal clearly show that the official liquidator has incurred expenditure for the purpose of protecting the source of income. In addition thereto, the earning of interest income by the official liquidator cannot be construed in isolation or apart from other activities of the official liquidator. The official liquidator performed his statutory duties and during the course of his performance of duties, he incurred certain expenditure and earned the interest income. Therefore, we are of the view that there is a connection or nexus between the expenditure incurred and the interest income earned by the official liquidator. We are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat all the expenses have to be incurred to maintain the infrastructure for earning or making the interest income. Without incurring these items of various expenditure, it would be impossible for any one much less the official liquidator, to earn this income by way of interest receipts or miscellaneous receipts." Following the said decision, we hold that the decision in each case would depend upon the facts of its own case and according to the facts of the present case, the Tribunal recorded a clear finding that the expenses were incurred by the official liquidator to maintain the infrastructure for the earning of the interest income and without incurring the expenditure, it would not have been possible for the official liquidator to earn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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