Law:

Section:

Section 37(1), read with section 4, of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1984-85 - Earlier, before publication of a book, assessee declared twice that he had thrown all his income from royalty of book authored by him and published by a publisher in New York into hotchpot of his HUF - Expenditure incurred in preparing book was to be debited to accounts of HUF - During relevant year Tribunal disallowed expenditure for second edition on ground that it was to be published by another publisher for which no declaration was made by author - Whether effect of declaration was to vest in HUF right to receive royalties on book and so, royalty received on second edition clearly vested in HUF even though it was published by different publisher - Held, yes - Whether, resultantly, expenditure incurred to bring second edition of book was to be allowed - Held, yes FACTS In 1967, the assessee, an author of a book made a declaration that he had thrown into the hotchpot of the HUF, all his income from the royalty of the book which he authored and was to be published by a publisher in New York. Expenditure relating to preparation of the book was debited to the accounts of that HUF. During the current year, the assessee claimed certain expenditure for bringing out the second edition of the book, which was published by a different publisher. The Assessing Officer did not allow that expenditure on the ground that no supporting evidence was provided. On second appeal, the Tribunal disallowed the assessee's claims on the ground the assessee's previous declaration did not extend to second edition. On reference : HELD The earlier declaration of the assessee in the year 1967 stated that all income accruing from the royalty of the book would be put into the bank account of the HUF. In a second declaration, the assessee confirmed that he had written the book and had thrown into the hotchpot of the HUF, the right to receive the royalties. The effect of these declarations was to vest in the HUF the right to receive the royalties on the book. The book had value because of the contents and the authorship of the assessee. The royalties were…

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