TMI Blog1975 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant years of assessment are 1965-66 and 1966-67. Assessee, an individual, purchased equity sharer, in M/s. Kalinga Tubes Ltd. by borrowing from M/s. Kalinga Foundation Trust and the Central Government of India. During the two years, assessee had to pay interest of Rs. 29,915 and Rs. 4,462, respectively, on the loans and claimed deduction thereof in respect of the respective assessment proceedings. The Income-tax Officer disallowed the claim on the ground that in the years of assessment, the shares purchased by the assessee yielded no dividend. The disallowance was upheld by the Appellate Assistant Commissioner in the assessee's appeals. In further appeal to the Tribunal, the assessee, reiterated his challenge against the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is admissible under section 57 of the Act, the assessee's claim cannot be sustained. Section 57 of the Act provides : " The income chargeable under the bead 'Income from other sources' shall be computed after making the following deductions, namely :- (i) in the case of dividends, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend on behalf of the assessee ; (ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub-section (2) of section 56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31, and sub-sections (1), (1A) and (2) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able under this Act which is payable without the taxable territories, not being interest on a loan issued for public subscription before the 1st day of April, 1938, or not being interest on which tax has been paid or from which tax has been deducted under section 18, or (c) any payment which is chargeable under the head 'Salaries' if it is payable without the taxable territories and tax has not been paid thereon nor deducted therefrom under section 18. " The court referred to a decision of the Supreme Court in the case of Eastern Investments Ltd. v. Comissioner of Income-tax [1951] 20 ITR 1 (SC) and ultimately concluded by saying--See [1957] 32 ITR 377, 389, 390 (Pat) : " In the Supreme Court case [1951] 20 ITR 1 (SC), the interest wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, capital expenditure for acquiring an investment, and, as such, the deduction claimed by the assessee on this account was disallowed. " This position was sustained by the Patna High Court. The other case relied upon by the revenue is that of the Calcutta High Court in Madanlal Sohanlal v. Commissioner of Income-tax [1963] 47 ITR 1 (Cal). The learned judges referred to the very same decision of the Supreme Court which was relied upon in the Patna decision. They also took into account two decisions of the Bombay and Allahabad High Courts reported in [1959] 36 ITR 329 (Bom) (Ormerods (India) Private Ltd. v. Commissioner of Income-tax) and [1960] 39 ITR 696 (All) (Chhail Behari Lal v. Commissioner of Income-tax) respectively taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to the conclusion that interest paid on capital borrowed for purchase of shares can be deducted from other income falling under section 12 of the Indian Income-tax Act, 1922, even though there was no dividend income from the shares. The matter arose for consideration in the case of Commissioner of Income-tax v. Dr. Fida Hussain G. Abbasi [1969] 71 ITR 314, 317 (MP), before the Madhya Pradesh High Court. Dixit C.J., speaking for the Bench, observed : " In our opinion, all that section 12(2) requires is that the expenditure should be incurred solely for the purpose of earning income or making profits or gains, that it is not required that it should be fruitful and that interest found to have been paid on money borrowed for investing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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