Business expenditure deduction depends on nexus with the relevant trading activity; litigation costs tied to a separate venture were disallowed.

Litigation expenses are deductible under Section 10(2)(xv) only when laid out wholly and exclusively for the purposes of the particular business whose profits are being computed, and the business must have been carried on in the relevant year. Expenditure connected with a separate venture cannot be shifted to another business. Here, the costs related to dissolution of a proposed partnership and recovery of capital were treated as expenses of terminating or protecting an investment, not as expenses incurred in earning profits from the assessee's continuing business. The deduction was therefore unavailable, and the matter was treated as turning on facts rather than raising a referable question of law.

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Issues: Whether litigation expenses incurred in proceedings relating to dissolution of a proposed partnership and recovery of capital contribution were admissible as a deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922, and whether any question of law arose from the Tribunal's decision.

Analysis: The allowance under Section 10(2)(xv) is confined to expenditure laid out wholly and exclusively for the purposes of the particular business whose profits are being computed, and the business must be one actually carried on during the accounting year. Where an assessee carries on more than one business, expenditure connected with one business cannot be transferred to another. The litigation expenditure in question was incurred in connection with a venture that had not been shown to be part of the assessee's existing money-lending or cloth business and, on the assessee's own case, related to the termination of the venture and recovery or protection of an investment rather than expenditure for earning profits in the course of a continuing business. The claim therefore failed both because the expense was not shown to be for the purposes of the business whose income was assessed and because the matter turned on facts, leaving no referable question of law.

Conclusion: The expenditure was not an allowable deduction under Section 10(2)(xv), and no question of law arose from the Tribunal's order.

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