| Case ID |
2bcfd9cf-bc92-4d74-bcea-cfaacb53647b |
| Body |
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| Case Number |
Civil Reference No. 600 of 1972 and I. T. Rs. 1972 |
| Decision Date |
Nov 02, 1983 |
| Hearing Date |
|
| Decision |
The Sindh High Court ruled that the interest paid by the assessee-company on borrowings for the purpose of investment in business was capital borrowed for the 'purpose of business' and therefore was deductible expenditure under section 10(2)(iii) of the Income Tax Act, 1922. The Tribunal's findings were upheld, indicating that the loans were secured from banks for carrying on its own business and advances were made to directors in the usual course of business. The court concluded that the department's claims were unsubstantiated and the appeals filed by the assessee-company were to be allowed, affirming the deductibility of the interest paid. |
| Summary |
In the case of Commissioner of Income-tax vs Messrs N. Fateh Ali & Co, the Sindh High Court addressed critical issues in the Income Tax Act, focusing on the deductibility of interest payments made by a company on loans acquired for business purposes. The case involved a conversion of one of the departments of the company into a limited concern with transferred assets and liabilities. The court examined the nature of the loans and the purpose behind the interest payments, ultimately deciding that such interest payments were indeed allowable as deductions under section 10(2)(iii) of the Income Tax Act, 1922. The ruling is significant for tax law practitioners, especially in understanding how the courts interpret business-related expenses and the criteria for deductible expenses in the context of corporate financing. This case emphasizes the importance of maintaining clear distinctions between personal and corporate finances and reinforces the legal framework governing business expenditures, making it a pivotal reference for future cases. The decision aligns with established precedents and clarifies the application of tax provisions in corporate law, thus serving as a valuable resource for tax professionals and litigators alike. |
| Court |
Sindh High Court
|
| Entities Involved |
Messrs Futehally and Company,
Messrs Futehally Chemicals
|
| Judges |
FAKHRUDDIN H. SHAIKH,
SALEEM AKHTAR
|
| Lawyers |
Shaikh Haider Ali for Appellant,
Mansoorul Arfin for Respondent
|
| Petitioners |
COMMISSIONER OF Income tax
|
| Respondents |
MESSRS N. FATEH ALI & Co
|
| Citations |
1984 SLD 70,
1984 PTD 341,
(1984) 50 TAX 189
|
| Other Citations |
Commissioner of Income-tax v. Gammon (Pak.) Limited, Karachi 1996 Taxation 394,
Commissioner of Income-tax, Andhra Pradesh v. Gopikrishna Muralidhar (1963) 47 I T R 469,
Amna Bai Hajee Issa v. Commissioner of income-tax Madras (1964) 51 ITR 835,
Steam Navigation Co. 1953 Private Limited v. Commissioner of Income-tax Bombay (1963) 48 I T R 476
|
| Laws Involved |
Income Tax Act, 1922
|
| Sections |
10,
10(2)(iii)
|