Deductibility of litigation costs for protecting agricultural land title upheld as expenditure to safeguard source of income.

Legal expenses incurred in litigation to protect title and possession over agricultural lands from which income arose were treated as deductible in computing agricultural income. The court reasoned that expenditure undertaken to safeguard the source of income, or to preserve title to the asset yielding that income, is allowable as a revenue deduction, and that the same principle applies in agricultural income-tax matters. On that basis, the assessee's litigation costs were allowed as a deduction and the Revenue's challenge failed.

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Issues: Whether legal expenses incurred by the assessee in litigation to protect title to agricultural lands and preserve the source of agricultural income were allowable as deduction in computing agricultural income.

Analysis: The expenses were incurred in prolonged proceedings initiated by the State, and the litigation was directed to protecting the assessee's title and possession over the lands from which agricultural income arose. Expenditure incurred to safeguard the source of income or to preserve title to the asset yielding income was treated as deductible, and the same principle applied equally to agricultural income-tax matters.

Conclusion: The legal expenses were allowable as a deduction, and the Revenue's challenge failed.

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