COMMISSIONER OF INCOME TAX Vs. GURUNATHAN

JUDGEMENT

(1.) THE facts leading to this reference are as follows : The assessee is an individual who had taken a property on rent for the purpose of business, on an agreement dt. 27th Oct., 1966, for a period of four years, paying a rent of Rs. 3,000 per mensem. This agreement provided that on termination, the tenant should vacate the premises, and in default, he would pay an amount of Rs. 5,000 per mensem till he vacates the property. The assessee, however, provided in the accounts for the earlier years even after 21st Oct., 1970, rent only at the rate of Rs. 3,000 per mensem. The landlord had instituted a suit for possession and damages, and that suit was decreed on 18th Nov., 1970.

(2.) THE assessee had resisted that suit by contending that the tenancy itself had been renewed by an oral agreement on the same terms. However, by reason of the decree, the assessee had to pay the additional amount of Rs. 2,000 per mensem. The assessee, therefore, provided in the accounts for the asst. year 1974 -75 an additional amount of Rs. 66,800 a sum of Rs. 13,401 towards litigation expenses and also a sum of Rs. 4,673 towards costs.

(3.) AT the instance of the Revenue, the following question has been referred :