TMI Blog1979 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... Shiv Lal Kanaiya Lal, being a proprietary concern of the assessee's brother and this concern had a credit balance with M/s. Shiv Lal Kanaiya Lal. The assessee got an amount of Rs. 1,13,500 transferred from the account of M/s. Yog Textile Mills to his personal account in the books of M/s. Shiv Lal Kanaiya Lal in order to clear a major portion of the debt due to the above firm. According to the assessee, this represented an arrangement made by the assessee with his brother for a loan on interest and M/s. Yog Textile Mills charged the assessee interest of Rs. 17,537 for the period from 1st April, 1966 to 31st March, 1967, relevant to the assessment year 1967-68, Rs. 15,724 for the period from 1st April, 1967, to 31st March, 1968, relevant to the assessment year 1968-69, and Rs. 18,091 for the period from 1st April, 1968, to 31st March, 1969, relevant to the assessment year 1969-70, and Rs. 13,337 for the period from 1st April, 1969, to 31st March, 1970, relevant to the assessment year 1970-71. This claim was disallowed by the ITO on the ground that the amount on which the interest had been claimed was not obtained by the assessee for the purposes of his business but was only obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd M/s. Indian Traders, was carrying on his personal business in the name of M/s. Ideal Woollen and Silk Mills, Amritsar. As mentioned earlier, his personal account in the books of the firm, M/s. Shiv Lal Kanaiya Lal, Delhi, as on April 1, 1966, showed a debit balance of Rs. 1,16,852. In order to pay off a major portion of the above debit balance, the assessee entered into an arrangement with M/s. Yog Textile Mills, a proprietary concern of his brother, who transferred a sum of Rs. 1,13,500 appearing as credit balance in the books of the Delhi firm to the credit of the assessee's personal account. Had the assessee not made this arrangement, he would have either paid the amount out of the capital standing in his personal business or might have resorted to borrowings from outside parties. The position of assessee's own capital in his personal business on the last date of the accounting period relevant to the assessment years in question, namely, as on March 31, 1967, March 31, 1968, and March 31, 1969, revealed the following position: Rs. (a) As on 31-3-1967 2,16,999 (b) As on 31-3-1968 2,83,001 (c) As on 31-3-1969 2,31,225 With the above capital in his personal books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible deduction u/s. 37(1) of the Income-tax Act ?" As is clear from what has been stated above, the short question which falls for determination in these cases, is whether the amount of interest claimed by the assessee regarding all the four assessment years, is an expenditure laid out or expended wholly and exclusively for the purpose of the business of the assessee or not. As is clear from the provisions of s. 37(1) of the Act, any expenditure which is in the nature of capital expenditure or personal expenses of the assessee, cannot be allowed in computing the income chargeable under the head " Profits and gains of business or profession ". It is clear that the ITO recorded a finding of fact, which finding was also affirmed by the AAC, that the debt which the assessee owed to M/s. Shiv Lal Kanaiya Lal, was incurred for his personal expenses. The Tribunal neither reversed this finding of fact nor was it challenged before us by the learned counsel for the assessee. We are, therefore, to proceed on the basis that the debit balance of Rs. 1,16,852 due to M/s. Shiv Lal Kanaiya Lal as on 1st April, 1966, was in connection with the personal expenditure of the assessee. We are of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous that the interest could not be claimed as an allowance from the profits and gains of the business. The claim, which cannot be sustained directly, cannot be allowed to be sustained by adopting an indirect method of suppositions based on the investigation of the motive of the assessee. If, in fact, the assessee had paid some amount from his business to pay off his personal debts to M/s. Shiv Lal Kanaiya Lal and subsequently, as a matter of fact, he needed some amount for running his business and if in that case, he had incurred a loan as a matter of fact, for running his business, it is probable that the assessee could make a claim for the deduction of the amount of interest from the profits and gains of his business, but not in the facts and circumstances of the present case. This view of ours finds support from a judgment of the Bombay High Court in Bai Bhuriben Lallubhai v. CIT [1956] 29 ITR 543, which decision was approved by their Lordships of the Supreme Court in Madhav Prasad Jatia v. CIT [1979] 118 ITR 200. While approving the decision, their Lordships observed as under: " It is true that the High Court did refer to the decision of the Bombay High Court in Bai Bhuriben' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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