Protective expenditure on income-producing assets was deductible despite no income arising from the relevant sub-source

Security charges incurred to safeguard land and a factory building were treated as deductible expenditure because they had a sufficient nexus with the relevant income-producing source. The absence of income from that sub-source in the relevant previous year did not defeat the claim, as the decisive point was preservation of the asset from which income could arise. The court therefore accepted that such protective expenditure may be allowed for set-off against other income where the connection with the source is established.

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Issues: Whether security charges incurred for safeguarding the land and factory building could be treated as a loss from a separate sub-source of income and set off against other incomes even though no income arose from that sub-source during the relevant previous year.

Analysis: The expenditure was incurred to safeguard the assessee's land and factory building and was held to have a sufficient nexus with the relevant income-producing source. The principle applied was that expenditure having such nexus is allowable as deductible outgo, and the absence of income from the sub-source in the relevant year did not prevent the claim.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Expenditure incurred to protect and preserve an income-producing asset, where it has a nexus with the source of income, is deductible and may be considered for set-off even if no income arose from that sub-source in the relevant year.

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