TMI Blog1964 (4) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... n partition of the family assets, is in the nature of a capital payment and not allowable under section 10(2)(iii)? 2. Whether, in the circumstances of the case, the Income-tax Officer's action in reopening the case under section 34(1)(b) for the years 1953-54 and 1954-55 was justified? The material facts are that in a partition of a joint family property between the assessee, Gangadharrao, who is the proprietor of the firm, Messrs. Ram Kishan Oil Mills, Lashkar, and his brother, Narayanrao, according to an order dated 5th August, 1946, of the Maharaja of Gwalior, Gangadharrao was required to pay ₹ 10,000 to his brother in lieu of Narayanarao's share in certain item of property, and an amount of ₹ 42,855 for the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner agreed with this view, and so did the Tribunal. This is a consolidated reference on the questions of law stated above arising out of the Tribunal's common order disposing of the four appeals preferred by the assessee against the assessment orders made in the assessment years 1953-54, 1954-55, 1955-56 and 1956-57. Under section 10(2)(iii) of the Act, the amount of the interest paid in respect of capital borrowed for the purposes of the business is a permissible deduction in the computation of profits and gains of business, profession or vocation. It is plain from the language of clause (iii) of section 10(2) that for a claim for deduction of interest under that provision all that is necessary is that, first, the money, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 999 years old leasehold interest in his business premises for a premium payable by instalments, and paid interest on the instalments outstanding from time to time. The Bombay High Court disallowed the deduction of interest amount as not being expenditure wholly and exclusively incurred for the purposes of the business. In that case, Stone C.J. said: In my judgment this interest payment on unpaid instalments cannot be stated to be wholly or exclusively a payment for the purpose of such business. No doubt the payment of interest on the arrears of purchase price of this leasehold interest in which the business is carried on may be said to be for the purposes of the business but it is not wholly or exclusively for the purposes of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital for investment in business, or as in this case for the purchase of the land, the income yielding investment. With all respect to the learned Chief Justice we are unable to agree with the implied principle, that though the payment of interest would satisfy the test that it had been incurred for purposes of the business, it would not satisfy the further test, that it must have been incurred wholly and exclusively for that business. In our opinion, the decision that is in point here is the decision of the Bombay High Court in Calico Dyeing and Printing Works v. Commissioner of Income-tax [1958] 34 I.T.R. 265. In that case, the assessee-firm, which carried on the business of bleaching, dyeing and printing cloth, borrowed money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red us to Bombay Steam Navigation Co. v. Commissioner of Income-tax*. That case is distinguishable by the circumstance that in that case the interest amount, of which deduction was claimed, was paid on the unpaid balance of the price of the assets acquired and there was no borrowing. The case of Bombay Steam Navigation Co. [1963] 48 I.T.R. 476 was analogous to Metro Theatre's case [1946] 14 I.T.R. 638 and was decided by following the decision in the latter case. It was also urged that there was no material to show that interest was paid by the assessee to the Gwalior Government or the successor Government. As to this, it is sufficient to say that we have not been asked to answer the question whether on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In Maharaj Kumar Kamal Singh's case [1959] 35 I.T.R. 1; [1959] Supp. 1 S.C.R. 10 the Supreme Court left open the question whether the Income-tax Officer could act under section 34(1)(b) even if he merely changed his mind without any information from an external source and came to the conclusion that in a particular case he had erroneously allowed an assessee's income to escape assessment. But so far as this court is concerned, it has been held in Income-tax Appellate Tribunal v. B.P. Byramji and Co. [1946] 14 I.T.R. 174 that an Income-tax Officer cannot take any action under section 34 merely because he intended to change his view or to hold an opinion different from that of his predecessor on some set of facts. In the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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