TMI Blog1980 (7) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in shares, etc., and partly for meeting personal liabilities like payment of income-tax, annuity deposit and household expenses. The ITO noted that out of the opening balance in the account of Harivallabhdas Kalidas Estate of Rs. 5,60,474, Rs. 3,19,340 were for withdrawals made for investment purposes and out of the withdrawals made in the accounting year, Rs. 26,025 were also for the purpose of investments. The ITO, therefore, allocated the interest claimed in the proportion of withdrawals for investment purposes and withdrawals for meeting personal liabilities like payment of income-tax, annuity deposit and household expenses, and he determined the former amount at Rs. 24,849 and allowed this as interest deficit against the claim of Rs. 33,515. Against the decision of the ITO, the assessee went up in appeal before the AAC and the AAC, relying on his order in the case of Arundhati Balkrishna (which was heard along with the case of the present assessee) and for the reasons discussed therein, dismissed the appeal of the assessee on this point. Against the decision of the AAC, the assessee went up in appeal before the Tribunal on this point and other points. At the time of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out from the decided cases were as follows : " On an analysis of the statutory language and principles laid down in the decided cases referred to above, the following propositions clearly emerge: (i) in order to decide whether an expenditure is a permissible deduction under s. 57(iii) the nature of the expenditure must be examined; (ii) the expenditure must not be in the nature of capital expenditure or personal expenses of the assessee; (iii) the expenditure must have been laid out or expended wholly and exclusively for the purpose of making or earning 'income from other sources'; (iv) the purpose of making or earning such income must be the sole purpose for which the expenditure must have been incurred, that is to say, the expenditure should not have been incurred for such purpose as also for another purpose, or for a mixed purpose; (v) the distinction between purpose and motive must always be borne in mind in this connection, for, what is relevant is the manifest and immediate purpose and not the motive or personal considerations weighing in the mind of the assessee in incurring the expenditure ; (vi) if the assessee has no option except to incur the expenditure in order to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the view expressed by this court in CIT. v. Indumati Ratanlal [1968] 70 ITR 353 and in Smt. Padmavati Jaykrishna v. CIT [1975] 101 ITR 153. The Division Bench in that decision preferred to follow the view of this court in CIT v. Mrs. Indumati Ratanlal [1968] 70 ITR 353 and Smt. Padmavati Jaykrishna v. CIT [1975] 101. ITR 153 and thus declined to follow the observations of the Bombay High Court in CIT v. H. H. Maharani Shri Vijaykuverba Saheb of Morvi [1975] 100 ITR 67. Learned Advocate-General appearing on behalf of the assessee has very strongly relied on the recent decision of the Supreme Court in Seth R. Dalmia v. CIT [1977] 110 ITR 644. Fazal Ali J., speaking for the court, has observed at p. 652 of the report as follows : " In Commissioner of Income-tax v. H. H. Maharani Vijaykuverba Saheb of Morvi [1975] 100 ITR 67 (Bom), a Division Bench of the Bombay High Court held that the deduction which is permissible under sub-section (2) of section 12 is an expenditure incurred solely for the purpose of making or earning the income which has been subjected to tax and the dominant purpose of the expenditure incurred must be to earn income. It was further held that the connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been incurred solely and exclusively for the purpose of earning income or making profit; (ii) the expenditure should not be in the nature of a capital expenditure; (iii) the amount in question should not be in the nature of personal expenses of the; (iv) that the expenditure should be incurred in the accounting year; and (v) there must be a clear nexus between the expenditure incurred and the income sought to be earned. These, five conditions are also to be found in the propositions which this High Court has culled out in Virmati's case . Under these circumstances, it is obvious that the decisions of this court, particularly in Virmati's case, are in no way affected by the principles laid down by the Supreme Court in Seth R. Dalmia's case [1977] 110 ITR 644. The question that arises for consideration in the present case is identical to the question that arose for consideration in Virmati's case and the two cases, are on par so far as the applicability, of the legal principles is concerned. In the light of the decision in Virmati's case, which is in no way affected by any subsequent decision of the Supreme Court, we hold that in the instant case also the interest defic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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