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TMI Blog1968 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... Likewise, he had also invested in Nathan Muthu Thalanar Estate, a forest taken for clearing and cultivation of paddy, etc., a sum of Rs. 2,25,000 towards his half share of the capital in a firm of partners of which the assessee was one. He returned an income of Rs. 7,661 from his money-lending business; but this was arrived at after deducting a sum of Rs. 20,700 by way of interest paid on borrowed money. The Income-tax Officer disallowed a sum of Rs. 5,321 as referable to a sum of Rs. 2,16,742 which constituted the assessee's share of the capital in Nathan Muthu Thalanar Estate. This was on the ground that this expenditure by way of interest was not wholly and exclusively laid out for the sake of the assessee's business. He reasoned that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us is two-fold: (1) that the expenditure by way of payment of interest on money borrowed and invested in the firm is expenditure allowable as deduction under section 10(2)(iii), and (2) that, as a matter of fact, the sum of Rs. 2,25,000 invested as share capital in the firm was not from borrowed money but out of the assessee's other funds in his money-lending business. On the first point, the argument is that, just as loss arising out of one of the businesses of the assessee could be set off against the profits and gains arising from other business of his, expenditure incurred in connection with a particular business of the assessee could be allowed as deduction from income arising from the other business. In support of this proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to set off the loss incurred by him as partner of the foreign business against the profits and gains of the business carried on in India. That is on the principle of aggregation of income under a particular head, for the charge is on the total income and, in arriving at the total income, naturally losses will have to be set off. That this is the principle of the decision emerges from the following observation in that case: " It is worthy of note that though the profits of each distinct business may have to be computed separately, the tax is chargeable under section 10, not on the separate income of every distinct business, but on the aggregate of the profits of all the businesses carried on by the assessee. " It was on that princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is permitted only in respect of an expenditure incurred in a business carried on by an assessee. If the business is not carried on, obviously expenditure incurred after such closure cannot come in for allowance as a deduction. That does not touch the question whether expenditure incurred in one type of business can be claimed as allowable deduction from the profits of another business, though both the businesses are carried on by the same assessee. Milapchand R. Shah v. Commissioner of Income-tax was a case in which a money-lending firm borrowed moneys on interest and made advances out of the borrowed moneys to the partners of the firm without charging any interest. This court held in the circumstances that the interest paid by the firm on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised, the Tribunal has not delat with it in its order. Learned counsel refers to certain figures of the funds available with the assessee for the accounting year and says that, where an assessee had funds part of which came from borrowing and the rest constituted capital of the business, there is no presumption that moneys drawn out of such common funds and invested in some other business came only from the borrowed money and not from the capital fund. As a proposition, we think that no exception can be taken to it. There is no presumption either way and it is a matter to be established by evidence. If the entire investment of the share capital in Nathan Muthu Thalanar Estate came from the assessee's capital fund in the money-lending busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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