| Case ID |
1a28c1d8-2d29-4e02-ac54-2d3272c3cc73 |
| Body |
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| Case Number |
IT REFERRED CASE Nos. 19 AND 20 OF 1967 |
| Decision Date |
Aug 01, 1968 |
| Hearing Date |
|
| Decision |
The Kerala High Court held that the expenditure incurred by way of interest paid on borrowed funds for the purchase of shares was not allowable as business expenditure under section 10(2) of the Income-tax Act, 1922. The court found that the assessee was not a dealer in shares and that the purchase of shares was not part of its business. The court also ruled that the claim for allowances under section 12(2) of the Act does not depend on whether the assessee received any income under the head 'other sources'. Therefore, the amounts paid by the assessee by way of interest on account of investments in shares were allowances admissible under section 12(2) of the Act. The decision was partly in favor of the assessee, allowing the claim for interest deduction under section 12(2). |
| Summary |
The case revolves around the interpretation of business expenditure and the allowances under the Income-tax Act. The Kerala High Court analyzed the claims of M.N. Ramaswamy Iyer regarding deductions for interest paid on funds borrowed for the purchase of shares. The court concluded that since the assessee was not in the business of dealing in shares, the interest paid could not be considered a business expense. However, the court clarified that deductions under section 12(2) could still be claimed, as the right to such allowances does not hinge on the receipt of income under 'other sources'. This ruling is significant for taxpayers involved in similar circumstances, as it sets a precedent for the treatment of interest payments related to investments that do not yield direct income. |
| Court |
Kerala High Court
|
| Entities Involved |
Not available
|
| Judges |
M.U. Isaac,
P. Narayana Pillai
|
| Lawyers |
K. Sreenivasan,
M.R. Krishnan,
K. S. Paiipoornan,
C.T. Peter
|
| Petitioners |
M.N. Ramaswamy Iyer
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1969 SLD 681 = (1969) 71 ITR 218
|
| Other Citations |
Appa Rao v. CIT [1962] 46 ITR 511 (Ker.),
Chhail Behari Lal v. CIT [1960] 39 ITR 696 (All.),
Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC),
Hughes v. Bank of New Zealand [1938] 6 ITR 636 (HL),
Kameshwar Singh v. CIT [1957] 32 ITR 377 (Pat.),
Madan Lal Sohan Lal v. CIT [1963] 47 ITR 1 (Cal.),
P.V. Mohammad Ghoase v. CIT [1963] 46 ITR 511 (Mad.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1),
57
|