TMI Blog1981 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... 613 in the assessment year 1970-71, except in so far as it can be related to the income from property ?" The assessee is a public limited company. It carried on business of manufacture and sale of wooden bobbins. That business was discontinued some time in the year 1951. Its stocks, however, remained which were being sold as and when customers were available and the balance was carried forward from year to year. In the accounting year 1968, the stock in hand was Rs. 5, 060 while in the accounting year 1969, the stock in hand was reduced to Rs. 4,856. In the year 1969-70, the assessee filed a return showing an income of Rs. 3,839 as interest and Rs. 7,200 as receipts by way of rent. Similarly, for the year 1970-71, it filed a return showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an clearly be related to the source from which the income was earned. The legal expenses for instance were incurred because the Registrar of Companies threatened to discontinue registration of the company as a company. Moreover, the company had necessarily to try for, the reduction of its liabilities and for profitable disposal of its assets just because these assets had ceased to be assets of the business, they did not cease to be sources of income or loss. The expenditure claimed by the assessee was claimed only for these purposes. We, therefore, direct that the whole of the expenditure claimed by the assessee for both the years should be allowed except in so far as it can be related to the income from property." Learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset of the company and was retained as such. Payment of interest thereon would be clearly an expense falling within the purview of cl. (iii) of s. 57 of the I.T. Act. Learned counsel for the department relied upon several decisions which interpret cl. (iii) of s. 57 and analogous provisions of the I.T. Act. They are all distinguishable on facts. For instance, in K. Mahesh v. CIT [1968] 70 ITR 240 (Mad), the question was whether the wealth-tax paid by the assessee on the net value of the stock owned by him was not an allowable expenditure. It was held that for an expenditure to come within the ambit of s. 57(iii) of the I.T. Act, 1961, it must be incidental to the making or earning of the income and there must be nexus between the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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