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TMI Blog1986 (3) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and deducted the cost of lottery tickets of Rs. 2,000 and a sum of Rs. 69,000 out of Rs. 84,000 said to have been incurred on encashment and court expenses and, thus, allowing a deduction of Rs. 71,000 before allowing deduction under section 80TT of the Act. In this way the ITO computed the income from lottery winnings at Rs. 4,62,090. 2. The Commissioner invoked his revisionary jurisdiction as according to him, the order passed by the ITO was erroneous and prejudicial to the interests of revenue inasmuch as he was of the opinion that the expenditure was incurred by the assessee after the income was earned and, therefore, it could not be attributed to the earning of any income. Further, there was no evidence even according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on specified under section 57 ought to be allowed in computing such income. In the case of the assessee not only litigation expenses but also expenses were incurred on politicians in order to influence the Director of Lotteries to make over the payment to the assessee without waiting for court proceedings, wherein another person claimed title to the lottery ticket, which won the prize. In the circumstances he pointed out that the Commissioner ought to have at least estimated the expenditure involved though full details or vouchers could not be furnished by the assessee. Relying on clause (iii) of section 57 he urged that the expenditure incurred by the assessee ought to be allowed. 5. The learned departmental representative on the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant which is reproduced below : "(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income." The Supreme Court in the case of Seth R. Dalmia v. CIT [1977] 110 ITR 644 at p. 650 observed that before provision of section 12(2) of the Indian Income-tax Act, 1922 ('the 1922 Act') equivalent to section 57(i) of the 1961 Act could apply the following conditions must be fulfilled, viz., (i) the expenditure must have been incurred wholly and exclusively for the purpose of earning income or making profit, (ii) the expenditure should not be in the nature of capital expenditure, (iii) the amount in question should not be in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said various tests to the case of the assessee, we find that only the cost of tickets purchased can be said to have nexus or connection with the winnings from lottery which can be said to be laid out or expended wholly and exclusively for the purpose of making or earning such income. Consequently, we hold that there is no nexus or connection between the expenditure incurred by the assessee in the court proceedings and for encashment as such expenditure does not satisfy the strict tests laid down in section 57(iii). In this view of the matter we are of the opinion that the Commissioner is not wholly correct in his view that only deduction under section 80TT was permissible and not the deduction under section 57. For the same reason there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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