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Issues involved:
The judgment deals with the allocation of expenses for an assessee deriving income from various sources, including exempt and taxable income, under section 10(29) of the Income-tax Act, 1961. Allocation of Expenses: The case involved a State Government-owned Corporation earning income from letting out warehouses, interest, administrative charges, and other sources. The Income-tax Officer found that only income from letting out warehouses was exempt under section 10(29), while other incomes were taxable. The assessee claimed that all expenses should be allowed in full, but the Income-tax Officer allocated expenses proportionately for taxable and non-taxable income. The Commissioner of Income-tax (Appeals) allowed the appeal, holding the entire income as exempt, thus not considering the expenditure allocation. The Punjab and Haryana High Court precedent was cited, stating that all expenditure incurred for the business must be allowed, regardless of the taxability of income. Appeal and Tribunal Decision: The Revenue appealed the decision, arguing that expenses should be allocated proportionately based on different sources of income. The Tribunal agreed, noting that the staff of the Corporation was engaged in earning various income sources, justifying proportional allocation of expenses. The Tribunal found no evidence to support the assessee's claim for full expense allowance and allowed the Revenue's appeal. Court's Decision: The High Court upheld the Tribunal's decision, stating that if expenditure is incurred to earn income from different sources, the portion related to taxable income is allowable under section 37. Without evidence from the assessee, the allocation of expenses on a proportionate basis was deemed appropriate. Citing previous judgments, including Kota Co-operative Marketing Society Ltd. v. CIT and Sabarkantha Zilla Kharid Vechan Sangh Ltd. v. CIT, the Court concluded that the Tribunal's decision to allocate expenses proportionately was lawful. Consequently, the reference was answered in favor of the Revenue and against the assessee.
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