TMI Blog1962 (8) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scindia Steam Navigation Company Limited with effect from the 30th of June, 1952. This scheme of amalgamation had provided that the Scindia Steam Navigation Company Ltd. would be entitled to float and establish a joint stock company with the object of taking over the passenger services on the Konkan coast and the ferry services in the Bombay harbour, which were formerly carried on by the Bombay Steam Navigation Company Limited. It was pursuant to this object that the assessee company was floated and incorporated on the 10th of August, 1953, as already stated. On the 12th of August, 1953, under an agreement entered into by the assessee company with the Scindia Steam Navigation Company Limited, the assessee took over the assets as des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties to make the transaction appear as a loan granted by the transferor company to the transferee company. Clause 3(b) of the original agreement, however, did not properly reflect the intention of the parties thereto and, therefore, a substitution in clause 3(b) of the original agreement was being made in order to reflect the proper intention of the parties. The substituted clause 3(b) was as follows: The balance shall be paid by the transferee company to the transferor company on completion of the transfer referred to in clause 2 above and until it is repaid in full the said balance or so much thereof as for the time being remains unpaid shall carry interest of 6% per annum (simple) and shall further be secured by hypothecation of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties. Interest in the present case has been paid by the assessee company on the unpaid balance of the purchase price of the assets which it had purchased from the Scindia Steam Navigation Co. Ltd. It has been held by this court in Metro Theatre, Bombay Ltd. v. Commissioner of Income-tax [1946] 14 ITR 638 that the mere purchase of a capital asset on a long term credit with a stipulation to pay interest on the reduced balance does not amount to the borrowing of capital within the meaning of section 10(2)(iii). In view of the said decision the claim for the deduction under section 10(2)(iii) cannot, in our opinion, be sustained. Neither is the claim sustainable under section 10(2)(xv ). For a deduction to come under section 10(2)(xv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur opinion the interest paid in the present case by the assessee was not any such expenses for the maintaining of the capital asset in business. It was a payment in addition to the purchase price, which the assessee was required to make for the delay in the payment of the purchase price of the assets and, therefore, was of the nature of a payment made in the acquisition of the asset and not maintaining it. The circumstance that, in the event of default of the payment of the balance of the purchase price, the assets would have been proceeded against under the hypothecation clause will not make the payment of the price of the capital asset a revenue expenditure for the purpose of maintaining the capital asset. The claim under section 10(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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