1999 (9) TMI 40

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..... Tribunal was justified in holding that the litigation expenditure is capital expenditure even when the expenditure incurred was in connection with an acquisition of a business asset, demanding a specific performance of the contract '?" The assessee is a firm carrying on trade in Bangalore. It had entered into contract with a trust to purchase a property but the trust did not convey the property. The assessee instituted a suit during the previous year, and expended a sum of Rs. 60,000 which it claimed in the revenue field. In appeal, the Commissioner of Income-tax (Appeals) deleted the sum of Rs. 60,000 which was disallowed by the Assessing Officer. The Revenue thereupon went in appeal before the Tribunal challenging the order of the deleti .....

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..... ract. Therefore a suit for specific performance had to be filed. The expenditure so incurred was in connection with the business and therefore is allowable in the revenue field. It is further contended that the expenditure is incapable of being capitalised in the event the assessee should lose the litigation or, for that matter, in a future year since the expenditure had been made in this year. The case of Dalmia Jain and Co. Ltd. [1971] 81 ITR 754 (SC), was relied on for the following proposition : "Where litigation expenses are incurred by the assessee for the purpose of creating, curing or completing the assessee's title to the capital, then the expenses incurred must be considered as capital expenditure. But if the litigation expenses .....

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..... e assessee loses the litigation it must be held to be a capital loss. Therefore, the issue of bringing the same into revenue field does not arise. On the other hand, the case reported in Plastic Products Ltd.'s case [1966] 62 ITR 209 (All), is applicable to the facts of the case. Even the case reported in a case of Indian Copper Corporation Ltd. v. CIT [1977] 110 ITR 434 (Patna), is a case where a suit had been filed for specific performance of an agreement for grant of extension of the lease. Though it is not acquisition of property but a lease, it was held that the expenditure was not deductible from the income. In the light of the above, we find that the order of the Income-tax Appellate Tribunal is not liable to be reconsidered. Accord .....

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