Business asset defence costs are revenue expenditure where litigation protects existing title rather than creating a new one.

Legal expenses incurred to resist a claim threatening a firm's business assets were treated as revenue expenditure because they were spent to defend an existing title, not to create, cure, or complete a defective one. Where litigation is aimed at preserving and protecting assets already employed in the business, the outlay falls within expenditure laid out for business purposes and is not capital in nature. The amount was properly claimed in the relevant previous year once it became ascertained after the trial court's decision.

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Issues: Whether the legal expenses incurred in resisting a claim challenging the assessee-firm's entitlement to assets invested in its business were allowable as a deduction in computing the assessee's income for the assessment year 1966-67.

Analysis: The expenditure was incurred in defending the existing title of the business assets and not in creating, curing, or completing a defective title. The litigation, though not directly against the firm as a formal party, threatened substantial business assets invested in the firm and its outcome could have materially reduced the capital employed in the business. Expenditure incurred to preserve and protect business assets against hostile assertion of title falls within the wider scope of expenditure laid out for the purpose of business and is revenue in character. The amount became ascertained only after the trial court decision, and the assessee was justified in claiming the full amount in the relevant previous year.

Conclusion: The expenditure was allowable as revenue expenditure and not capital expenditure.

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