9911796707
TMI Blog1986 (9) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year. Dwaraka Chit Funds (P.) Ltd. was a company carrying on chit fund business. The Hon'ble Madras High Court ordered this company to be wound up by its order dated 25-6-1976. The High Court appointed the Official Liquidator as the liquidator for the company, which went into liquidation. While completing the assessments for these six years pursuant to the orders passed by the Commissioner under section 263 of the Income-tax Act, 1961 ('the Act') the ITO disallowed expenses claimed by the Official Liquidator against the interest receipts and other miscellaneous receipts as not allowable. The amounts so disallowed by the ITO were the following : Assessment year Amount disallowed 1978-79 4,296 1979-80 7,173 1980-81 5,923 1981- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983, dated 5-11-1983] and submitted that in view of this decision of the Tribunal, the Commissioner (Appeals) was not justified in allowing the expenditure claimed by the Official Liquidator in the present case. He further relied on the following decisions---Travancore Titanium Product Ltd. v. CIT [1966] 60 ITR 277 (SC), K. Mahesh v. CIT [1968] 70 ITR 240 (Mad.) and South Arcot Electricity Distribution Co. Ltd. v. CIT [1974] 94 ITR 469 (Mad.). He argued that in the light of these decisions it would be clear that the assessee was not entitled to any of the deductions claimed by him in the present case. 4. On behalf of the Official Liquidator, Shri R. Vijayaraghavan the learned counsel relied on the order of the Tribunal in the case of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re audited by the examiner of local fund accounts and which were approved by the High Court. Thus, there can be no dispute about the genuineness of the expenditure claimed by the Official Liquidator. 6. The argument on behalf of the revenue is that these expenses were not laid out or expended wholly and exclusively for the purpose of making or earning the income under the head 'Income from other sources' as specified in section 57(iii). It is the argument of Shri S. Renganathan that the income shown by the Official Liquidator represented interest receipts and miscellaneous receipts and that for earning these receipts the expenses claimed by the Official Liquidator under the various heads could not be held to have been laid out or expended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn this income by way of interest receipts or miscellaneous receipts. It is in the context of these facts and circumstances that the Commissioner (Appeals) rightly held that these expenses were incurred by the Official Liquidator wholly, exclusively and necessarily for the purpose of earning or making the income as described in section 57(iii). We entirely agree with the reasoning of the Commissioner (Appeals) to allow these expenses in all the years. 7. We are supported in our view by the decision of the Bombay High Court in the case of H. H. Maharani Shri Vijaykuverba Saheb of Morvi. In this case, their Lordships of the Bombay High Court held that the deduction which is permissible under section 12(2) of the Indian Income-tax Act, 1922, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on securities'. The ITO rejected the claim, but it was allowed by the Tribunal. While affirming the order of the Tribunal, their Lordships of the Bombay High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of the income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by the reason of the exercise of that option would come within the ambit of section 12(2). The decisions of the Tribunal in the case of Gannon Dunkerley Co. (P.) Ltd. relied on by the learned counsel also support the case of the assessee. The other decision in the case of Pilot Pen Co. (India) (P.) Ltd. relied on by the learned departmental representative turned on their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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