TMI Blog1965 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed under section 8 ? " On 23rd May, 1949, the assessee purchased debentures of a company, called Messrs. Malwa Vanaspati and Chemical Ltd., Indore, for a sum of Rs. 7,00,000. The price of the debentures was paid by the assessee partly from the funds available with him and partly from a loan in the sum of Rs. 4,90,000 taken by him from the Bank of Bikaner, Bombay. For the assessment years 1953-54 and 1954-55, to which this reference relates, the assessee received no interest on the aforesaid debentures. He, however, paid interest to the Bank of Bikaner on the money which had been borrowed by him for purchasing them. It appears that the assessee derived income from some other debentures. During the assessment year 1953-54, this tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction was made between the words " no tax is payable " and " deductions or allowances " as employed in other sections of the Act, and it was held that no negative income or loss could arise under the head " Interest on securities " under section 8. Our attention has been invited by the learned counsel for the assessee to various provisions of the Act, some of which may be mentioned. Under section 3, income-tax is charged for any year in respect of the total income of the previous year. According to section 2(15) " total income " means total amount of income, profits and gains computed in the manner laid down in the Act. Section 6 gives the " Heads of income chargeable to income-tax." These are : " (i) Salaries. (ii) Interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12B, which relates to " Capital gains ", deductions of various items given in sub-section (2) from the full value of the consideration for the sale, etc. are allowable in computing the amount of capital gains. It is unnecessary to mention the other provisions except section 24(1), which provides that where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year. According to the learned counsel for the assessee, although there is a marked difference between the language employed in section 8 relating to the head " Interest on securities " and the other provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st which he pays to the creditors on the borrowed money under the head " Interest on securities ", so as to be able to claim a set-off under section 24 if the income is negative and more in the nature of a loss, as in the present case. On behalf of the department, the contention was and is that section 8 is worded differently from the sections relating to other heads and that shows that the intention of the legislature was to treat the aforesaid head distinctly and differently from the other heads. The learned counsel for the assessee has invited our attention to the statement contained in clause 19 of the draft bill which later on was incorporated in section 19 of the Income-tax Act of 1961. That section makes it clear that the income ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res integra and does not appear to have come up directly for consideration in any other case. It is needless to reiterate the view that the language of the proviso to section 8 is very unhappy and indeed has been described as " crude " by Chakravartti C.J. in United Commercial Bank Ltd. v. Commissioner of Income-tax. There are certain observations in the aforesaid Calcutta case which may be noticed as these are, with respect, helpful in understanding the scope of the proviso to section 8. It was observed at page 432 : " What the first proviso to section 8 says is that in cases where the securities, from which the interest charged to tax is derived, have been acquired with money borrowed for the purpose, the assessee will be allowed to ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest payable on money borrowed for the purpose of investment in the securities" immediately follow the provision relating to expenses incurred for the purposes of realising interest. The same meaning, therefore, should normally be attributed to these words, namely, that such interest paid on borrowed capital would be deductible only if there is receipt of interest. It is also significant, as has already been mentioned before, that the phraseology employed in section 8 is different and distinct from the phraseology used in the section relating to other heads and the provisions made therein with regard to the allowances which can be claimed as permissible deductions. We are, therefore, of the opinion that the view taken by the Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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