Winding-up litigation costs are not revenue deductible unless business necessity is shown.

Expenditure incurred in connection with winding-up proceedings was not deductible as revenue expenditure because the assessee failed to show that taking up or ing those proceedings was necessary for its business. The Tribunal's factual finding that the assessee had not established business necessity was decisive, so the claimed amount was disallowed in assessment. The governing principle is that costs linked to winding-up proceedings are deductible only where their necessity for the assessee's business is shown.

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Issues: Whether the assessee was entitled to claim Rs. 75,000 incurred in prosecuting winding-up petitions as an expenditure of revenue nature.

Analysis: The expenditure was claimed in relation to proceedings for winding up the lessee-company. The Tribunal found that the assessee had not shown that it was necessary for it to take up the winding-up proceedings or to finance proceedings initiated by third parties for winding up the lessee-company. On that finding, the item could not be treated as revenue expenditure deductible in assessment.

Conclusion: The claim for Rs. 75,000 was disallowed and the issue was answered in the affirmative and against the assessee.

Final Conclusion: The reference was answered only on the expenditure question, resulting in disallowance of the claimed amount and leaving the first question unanswered.

Ratio Decidendi: An expenditure incurred in connection with winding-up proceedings is not deductible as revenue expenditure unless its necessity for the assessee's business is shown.

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