INDERMANI JATIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act. The question which has been referred to this court for opinion is :

(2.) THE facts giving rise to the reference lie within a narrow compass. One Rai Bahadur Gangasagar Jatia, 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, namely, 1946-47, she took out letters of administration and incurred an expenditure of Rs. 2,17,738 including Rs. 2,13,000 spent on stamp duty. THE amount of expenditure was not disputed by the department. In her assessment for the year in question the assessee claimed deduction of the amount under section 10(2)(xv) or alternatively under section 12(2). THE claim was based on the argument that the assessee was the universal legatee of her deceased husband under his will. As such under the will she had acquired an absolute title to the properties of her husband. THE properties vested in her from the moment of the death of her husband. It was not necessary for her to obtain letters of administration for perfecting or for getting a better title to the properties than what she had already acquired under the will. THE letters of administration had been taken out by her for facilitating the administration of the estate or to collect the income of the estate. THE claim was overruled by all the authorities below. THE Income-tax Appellate Tribunal came to the conclusion that the expenditure was of a capital nature and not of a revenue nature. It took the view that even though the assessee might have acquired a title to the estate under the will, the letters of administration conferred on her a title to administer the estate and it was immaterial whether the expenditure has been incurred for acquisition of title to property or for acquisition of title to administer the estate. THE expenditure was in either event in the nature of a preliminary lay-out of expenses for acquiring an asset of an enduring benefit. THE Tribunal further held that the expenditure incurred had nothing to do with the production of income. In other words 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 :