9911796707
TMI Blog1968 (8) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Narasimha Bank, Alathur 4,487 For the assessment year 1959-60, the assessee returned a net loss of Rs. 1,890 under business. The deductions made by the assessee in arriving at the above amount consisted of a sum of Rs. 17,514. This represented interest paid on loans to the following parties : 1. Palghat Financing Co. (P) Ltd. 10,080 2. Palghat Investment Corporation Ltd. 1,995 3. Narasimha Bank 3,090 4. M. N. Ramaswamy Iyer & Co. Ltd. 2,349 The amounts paid as interest by the assessee to the aforesaid concerns in the two years of assessment did not relate to amounts which it borrowed for its banking or chit business, but it represented amounts invested for acquiring shares in the said concerns. The assessee however, claimed to deduct the said amounts under clauses (iii) and (xv) of section 10(2) of the Act on the ground that the investment in shares was part of its business, and that, at any rate, the acquisition of shares in the said concerns was necessary for the purpose of furtherance or preservation of its own business. The claim was disallowed by the Income-tax Officer on the ground that these investments did not relate to his business, and that they did not yield any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be claimed as a business expenditure of the assessee. It must, therefore, follow that the first part of the questions referred to us in both these cases must be answered against the assessee. The next question for consideration is whether the claim can be allowed under section 12 of the Act. The reason for disallowing this claim is stated by the Appellate Tribunal in paragraph 25 of its order; and it reads as follows : " In our opinion, section 12 has also no application. The case relied on by the assessee's learned counsel, Appa Rao v. Commissioner of Income-tax , proceeded on the finding that the expenditure by way of payment of interest was incurred solely for the purpose of making or earning such income from the shares acquired with the amount borrowed. The only point made out by the department was that there was no income. The facts in the assessee's case are entirely different. The Appellate Assistant Commissioner stated that the shares had come out of borrowals but that was on an overall position of the capital account and profits and the amount of investments from year to year. There is no direct connection between the money borrowed and the purchase of shares. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in any other industrial shares, or shares in other companies. Normally a banker invests in shares with a view to supplant his income but in this case it cannot be said that the purchase of these shares had been made with any such purpose. In our opinion the investment of Rs. 6,69,243 in the year ending in December 31, 1957, and Rs. 6,81,633 in the year ending December 31, 1958, was not for the purpose of business and, therefore, the interest paid on moneys corresponding to that amount cannot be allowed as a deduction ". It is, therefore, not in dispute that the sums of Rs. 18,525 and Rs. 17,514 which the assessee claimed for the assessment years 1958-59 and 1959-60 respectively represented the interest attributable to the amounts invested on shares. This is the basis on which the claim of the assessee in respect of the said amounts has been dealt with by the Appellate Tribunal, and the subordinate authorities. It is not disputed that, if the assessee earned any dividend on the shares held by the assessee, it would be income under the head "other sources". Admittedly, during the two previous years concerned in these cases, the assessee did not receive any dividend; but it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st payment of Rs. 7,500 would be a proper charge on that income. So much is conceded by Mr. Ranganathan, learned counsel for the department. But then, it is pointed out that the assessee did not earn any dividend income from these shares in the relevant year, and, in fact, he had no income to be assessed under the miscellaneous head of section 12. The submission on behalf of the revenue is that the absence of any income by way of dividend or other miscellaneous income under section 12 operates as a bar against the assessee to claim the interest payment as a revenue charge. It is now a well accepted rule of income-tax law that what the statute allows as a proper allowance or expenditure, and which can be brought on the debit side of the assessee's profit and loss account to off-set his credit receipts and to compute the income, profits and gains chargeable, cannot be defeated by the mere accident of the assessee not being in a position to show that the receipts exceed the expenses or that the credit side is larger in amount than the debit side. " This decision fully supports the claim of the assessee. The learned counsel for the revenue advanced before us the same contention as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense." In Eastern Investments Ltd. v. Commissioner of Income-tax, the Supreme Court was dealing with a claim under section 12(2) of the Act for deduction of interest paid by the assessee on debentures; and it said: " It is not necessary to show that-the expenditure was a profitable one or that in fact any profit was earned. According to the decision of the Patna and the Calcutta High Courts, the question of allowance of the expenditure under section 12(2) of the Act does not arise, unless there is some income actually received under the head "other sources". It is this view that was pressed before us by the learned counsel for the revenue. He did not say that the position would be the same in respect of income under other heads. But he submitted that it was so in the case of income under "other sources" ; and he relied on the following statement of P. B. Mukharji J. in Madanlal Sohanlal v. Commissioner of Income-tax. " The principles for deduction of expenditure are different in different sections under different heads of income. It is a wrong attempt to find or seek ..... X X X X Extracts X X X X X X X X Extracts X X X X
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