Law: Income Tax Act, 1922

Section: 10,10(2)(xv)

Indian Income-tax Act, 1922 (XI of 1922)-Section 10 (2)(xv)-Business expenditure -Interest on borrowed capital- Firm doing textile as well as banking business-Acceptance of deposits from clients initially for business purposes-Tribunal finding that deposits were received in course of and necessary for business-Subsequent uses for other purposes- Whether of no material-Held yes-Interest allowed on borrowed money- Whether justified-Held yes-Ground that finding of Tribunal was based on conjecture not raised in question referred-Whether can be considered --Held no For the assessment years 1958-59 to 1965-66, the Income-tax Officer disallowed the assessees claim for deduction of interest on borrowings on the ground that they were not for business purposes but were partly for meeting certain income-tax liabilities of the firm and partners. On appeal, the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer tier the assessment years 1958-59 to 1962-63 and 1965-65, but deleted, the additions for the assessment years 1963-64 and 1964-65, On appeals to the Appellate Tribunal both by the revenue and the assessee, the revenue, contended that for the assessment years 1951-52 and 1952-53, a similar claim for deduction of interest was disallowed by the Tribunal and the position had not changed during the assessment years 1958-59 to 1965-66. The assessee contended that when the question was previously decided by the Tribunal, it did not have the advantage of the decision in the case of Commissioner of Income-tax v. Bombay Samachar P. Ltd. [1969] 74 ITR 723 (Bom) and since the case of the assessee was fully covered by the ratio of that decision, the Tribunal should not follow its earlier decision but should decide the question a fresh. The assessee also contended that, firstly, there were no fresh borrowals during the years, secondly, that the business being that of banking there were no borrowals as such but only deposits were made by the clients and, thirdly, that during the years 1946-47 to 1951-52, thea ssessee was required by the income-tax authority to pay large sums by way of income-tax and excess profits tax, not against specified demands but…

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