Law:

Section:

JUDGMENT Pathak, J.-The assessee, Smt. Indermani Jatia, was the widow of Seth Ganga Sagar Jatia of Khurja. She carried on money-lending business and other businesses, and derived income from investment in shares, properties and businesses. The capital assets and income in respect of the different sources of income were incorporated in common sets of books. At the beginning of the accounting year, relevant to the assessment year 1957-58, the capital account showed a net credit balance of Rs. 26,31,496. During the year, it is said, she donated a sum of Rs. 10 lakhs for the setting up of an engineering college at Khurja to be named after her husband. The amount was debited to the capital account and corresponding credit was given to the account of the institution. At the close of the accounting year, after debiting the aforesaid sum of Rs. 10 lakhs the capital account showed a net credit of Rs. 15,06,920. The amount actually paid by the assessee during the year of account to the institution was only Rs. 5,50,000. The balance of Rs. 4,50,000 was treated as a debt due to the institution and accordingly the assessee was debited with interest thereon. The assessee had an overdraft account with the Central Bank of India, Aligarh. At the beginning of the accounting year, the amount outstanding on the overdraft was Rs. 2,76,965. Further overdrafts were raised during the year so that at the end of the year the liability of the assessee to the bank stood at Rs. 9,55,460. Among further debits to that account during the year was the aforesaid sum of Rs. 5,50,000 paid to the engineering college on January 7, 1956. In assessment proceedings for the assessment years 1957-58, 1958-59 and 1959-60 the assessee claimed deduction of the interest paid by her to the bank in respect of the aforesaid overdraft account. The assessee contended that she had preferred to draw on the overdraft account of the bank for the purpose of paying the institution and that if she had not done so she would have had to dispose of her shares for the purpose of making such payment. The case was that in order to save the income-earning assets the loan was taken and, therefore, the interest paid should be…

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