C.K.Banerji, J. - (1.) This reference arises out of the I.T. assessment of M/s. East India Development Co. (P.) Ltd., the assessee, for the assessment year 1965-66, the relevant previous year being the year ending on the 31st March, 1965. The facts found by and/or admitted before the Tribunal are shortly as follows :
(2.) The assessee, a company, carries on business of share dealings. It also has income by way of commission from managing agency and from subletting a portion of its office premises at No. 9, Brabourne Road, Calcutta. The assessee is a lessee of the said premises at an annual rent of Rs. 42,000. A portion of the said premises is Sub-let by the assessee to M/s. Kusum Products Ltd., a company managed by the assessee, and another portion thereof is Sub-let to Standard General Assurance Co. Ltd. In 1963, the assessee instituted a suit for ejectment of its Sub-tenant, Standard General Assurance Co. Ltd. The suit was ultimately settled and the said Sub-tenant surrendered and vacated a portion of its Sub-tenancy comprising of about 2,700 sq. ft.
(3.) Before the ITO, the assessee claimed deduction from its rental income of Rs. 17,974 and Rs. 31 on account of expenses incurred for the said suit. The ITO held that the said expenses were capital in nature as the assessee incurred the same for obtaining possession of a portion of its office premises, a capital asset, and not for the purpose of earning any rental income and rejected the claim of the assessee.;