TMI Blog1968 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... er Estate, an agricultural estate in which he had invested Rs. 1,00,000 towards his share capital. 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,321 under section 10(2)(iii) of the Income-tax Act, 1922 ?" The contention of the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried on business in India, was also a partner of a firm carrying on business outside India, he was entitled 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance, is extracted from the language employed by section 10(1). The allowance under section 10(2) 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded an opportunity to raise it before the Tribunal. This is on the ground that the point having been raised, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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