TMI Blog1978 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... income by way of commission from managing agency and from sub-letting a portion of its office premises at No. 9, Brabourne Road, Calcutta. The assessee is a lessee of the said premises at an annual rent of Rs. 42,000. A portion of the said premises is sub-let by the assessee to M/s. Kusum Products Ltd., a company managed by the assessee, and another portion thereof is sub-let to Standard General Assurance Co. Ltd. In 1963, the assessee instituted a suit for ejectment of its sub-tenant, Standard General Assurance Co. Ltd. The suit was ultimately settled and the said sub-tenant surrendered and vacated a portion of its sub-tenancy comprising of about 2,700 sq. ft. Before the ITO, the assessee claimed deduction from its rental income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from Rs. 3,812 to Rs. 9,800 per month. It was, therefore, contended that the said litigation expenses were incurred wholly and exclusively for increasing the rental income of the assessee and was an allowable deduction. On behalf of the revenue, it was contended on the other hand that the expenditure incurred on litigation was not directly related to the earning of the rental income, being an income from other sources, but was at the most an expenditure incidental to it and the same could not, therefore, be allowed. The Tribunal found that the expenditure in issue was incurred solely for the purpose of earning enhanced rental income and was not in the nature of a capital expenditure or personal expenses of the assessee and was, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of making or earning such income. " Mr. Pal urged that it was not established that the said expenses were incurred by the assessee wholly and exclusively for the purpose of making or earning the rental income. The object of the suit filed by the assessee was only to recover possession of part of the premises from the sub-tenant and utilise the same for the assessee's own use. He urged that the assessee's contention to the contrary before the Tribunal could not be accepted in view of the clear admission of the assessee before the AAC. Mr. Pal contended further that the deductions allowed from " Income from other sources" were more restricted than those allowed from income from business, and even if there was some indirect connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss one way or the other but would have affected only the respondent's share as owner of them, how can they be said to have been expended in the production of the profits from this taxable source, so as to satisfy the requirements of sections 9 and 10 ? " Mr. R. N. Bajoria, learned counsel for the assessee, contended on the other hand that the revenue was not entitled to challenge the findings or the conclusions of the Tribunal as perverse. It was not disputed before the Tribunal that the said legal expenses were incurred for earning the rental income, the only contention being that the same was not directly related to the earning of the said income but was incidental to it. Mr. Bajoria next contended that question No. 2 was a corollar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed must be to earn income. It was farther held that the connection between the expenditure and the earning of income need not be direct, and even an indirect connection could prove the nexus between the expenditure incurred and te income. We fully agree with the view taken by the Bombay High Court. " In A. W. Davith Appuhamy [1964] 54 ITR 548 (PC), the litigation expenses did not affect the profits of the business one way or the other but affected only the share of the assessee in such profits and as such, in our opinion, the said decision has no application to the facts and circumstances of this Case. The decision of the Supreme Court in Seth R. Dalmia [1977] 110 ITR 644, gives a quietus to the contention of Mr. Pal that indirect conne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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