Law: Income Tax Act, 1961

Section: 37(1)

Section 37(1) of the Income-tax Act, 1961 [Corresponding to Section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment year 1946-47 - Whether expenditure incurred by assessee, a sole legatee of estate of her deceased husband, in taking out letters of administration was not permissible deduction under section 10(2)(xv) or 12(2) of 1922 Act - Held, yes FACTS The deceased who had income from business, dividends and property, etc., died issueless leaving the assessee, his widow, as his sole heir. Prior to his death he had executed a will in her favour. After his death during the accounting period relevant to the assessment year in question, she took out letters of administration and incurred an expenditure of Rs. 2,17,738 including Rs. 2,13,000 spent on stamp duty. In her assessment for the year in question the assessee claimed a deduction of the amount under section 10(2)(xv) of 1922 Act or alternatively under section 12(2) of 1922 Act. The claim was overruled by all the authorities below. The Appellate Tribunal came to the conclusion that the expenditure was of a capital nature and not of a revenue nature. The two-fold ground on which the Tribunal rejected the claim was: (1) that it was an expense incurred initially and once and for all to acquire the right of administration of the estate and (2) that the expenditure had nothing to do with the running of business or the earning of income. On reference: HELD It had not been possible for the assessee to show how the expenditure was in any way connected with, or related to, the carrying on of the business and other trading activities left by the deceased husband of the assessee. The obtaining of the letters of administration could only have the effect of dispensing with proof of the assessee's title to the estate under the will. If the letters of administration had not been obtained she would be required to prove the will over and over again. This might be of advantage to the assessee in administering the estate or in collecting its income. The administration of the estate and the collection of the income would be in the capacity of the assessee as the owner of the…

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