Law:

Section:

Section 57 of Income-tax Act, 1961 - Income from other sources - Deductions - Assessment year 1965-66 - Assessee-company instituted a suit for ejectment of a sub-tenant and on settlement, sub-tenant surrendered and vacated a portion of its sub-tenancy - Assessee claimed suit expenses as deduction from rental income - ITO held that expense were capital in nature as same were incurred for obtaining possession of a portion of its office premises i.e. a capital asset - On appeal before Tribunal, assessee contended that as a result of said suit sub tenant not only vacated a portion of its sub-tenancy but also increased rent of portion still occupied by it - It was, thus, Contended that said litigation expenses were incurred wholly and exclusively for increasing assessee's rental income and were an allowable deduction - Tribunal held that expenditure in question was allowable expenditure under head 'Income from other sources' - Whether since ejectment suit had ultimately led to a substantial increase of rental income of assessee, Tribunal's conclusion that expenses were allowable as deduction under section 57(iii), could not be said to be perverse - Held, yes FACTS The assessee-company carrying on business of share-dealings, had income by way of commission from managing agency and from sub-letting a portion of its office premises. It had sub-let two portions of its office premises to two companies. The assessee filed a suit for ejectment of its sub-tenant. The said suit was ultimately settled and the sub-tenant surrendered and vacate a portion of its sub-tenancy. The assessee's claim for deduction of the suit expenses was rejected on the ground that it was capital in nature as the assessee incurred the same for obtaining possession of a capital asset and not for the purpose of earning any rental income. On appeal before the Tribunal, the assessee contended that as a result of said suit sub tenant not only vacated a portion of its sub tenancy but also increased the rent of the portion still occupied by it. It was, therefore, contended that said litigation expenses were incurred wholly and exclusively for increasing the rental income of the assessee and was an…

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