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TMI Blog1983 (10) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 990?" ITRC. Nos. 179 and 180 of 1980 " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expenses towards audit fees, establishment charges, filing fees, maintenance of building, etc., is an allowable deduction, even though the expenses have no direct nexus in earning the income. " The common assessee, in these cases, is a private limited company. Its income during the relevant years was only by way of rents payable for stables let out for horse owners. For the assessment year 1975-76, the assessee had collected Rs. 20,000 as rent. The assessee claimed certain deductions under s. 57(iii). The ITO held that none of the expenses claimed was attributable to the earning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier assessment year held that the assessee would be entitled to all expenses except legal expenses amounting to Rs. 2,500 and preliminary expenses amounting to Rs. 4,154 for the assessment year 1976-77. Likewise for the year 1977-78, the AAC allowed the other expenses claimed except the legal fees to the extent of Rs. 750. The Department being aggrieved by the order of the AAC preferred appeals to the Tribunal. The assessee complaining of the disallowance of legal expenses also appealed to the Tribunal. The Tribunal allowed the assessee's appeal and remitted the case back to the AAC for fresh disposal to consider the details of the expenses on record, while dismissing the appeals preferred by the Department. The reasons given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for the office establishment. It was a little over Rs. 9,000 for the year 1976-77. For the year 1977-78, one does not know the real expenses claimed by the assessee under that head and yet the Tribunal did not interfere with the order of the AAC. The primary question for consideration is whether the expenses claimed by the assessee fall under s. 57(iii) of the I.T. Act. Section 57(iii) provides: " 57. The income chargeable under the head 'Income from other sources ' shall be computed after making deductions, namely : . ...... (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 above clause no doubt s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 57 of the Act: vide the decision of the Calcutta High Court in Commissioner of Income-tax v. Bihar Spinning Weaving Mills Ltd. [1953] 24 ITR 108. " In CIT v. Bihar Spinning Weaving Mills Ltd. [1953] 24 ITR 108, the Calcutta High Court observed at p. 115: " Consideration such as the necessity of keeping the company alive or such as the necessity of maintaining an establishment for the purposes of the prospective business, are wholly extraneous and cannot be utilised for enlarging the amount of the deduction nor can any allowance which is claimable only under section 10 be allowed or claimed before a business income assessable under the Act has emerged. " It is clear from these principles that if there is a nexus between th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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