1981 (2) TMI 75

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....es of Rs. 11,295 in the assessment year 1969-70, and Rs. 10,613 in the assessment year 1970-71, except in so far as it can be related to the income from property ?" The assessee is a public limited company. It carried on business of manufacture and sale of wooden bobbins. That business was discontinued some time in the year 1951. Its stocks, however, remained which were being sold as and when customers were available and the balance was carried forward from year to year. In the accounting year 1968, the stock in hand was Rs. 5, 060 while in the accounting year 1969, the stock in hand was reduced to Rs. 4,856. In the year 1969-70, the assessee filed a return showing an income of Rs. 3,839 as interest and Rs. 7,200 as receipts by way of re....

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.... exist as a company. Similarly, there are certain expenses which can clearly be related to the source from which the income was earned. The legal expenses for instance were incurred because the Registrar of Companies threatened to discontinue registration of the company as a company. Moreover, the company had necessarily to try for, the reduction of its liabilities and for profitable disposal of its assets just because these assets had ceased to be assets of the business, they did not cease to be sources of income or loss. The expenditure claimed by the assessee was claimed only for these purposes. We, therefore, direct that the whole of the expenditure claimed by the assessee for both the years should be allowed except in so far as it can ....

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....s paid as interest on a loan taken from the State Govt. The loan was an asset of the company and was retained as such. Payment of interest thereon would be clearly an expense falling within the purview of cl. (iii) of s. 57 of the I.T. Act. Learned counsel for the department relied upon several decisions which interpret cl. (iii) of s. 57 and analogous provisions of the I.T. Act. They are all distinguishable on facts. For instance, in K. Mahesh v. CIT [1968] 70 ITR 240 (Mad), the question was whether the wealth-tax paid by the assessee on the net value of the stock owned by him was not an allowable expenditure. It was held that for an expenditure to come within the ambit of s. 57(iii) of the I.T. Act, 1961, it must be incidental to the m....