Law: Income Tax Act, 1922

Section: 10(1), 16(3)

Income-tax--Business expenditure-Interest pail by assessee on loan borrowed by him for a firm of which he is a partner Whether allowable-Indian Income-tax Act, 1922, Ss. 10(1) & 16(3). The assessee was conducting a tin factory. He also formed a partnership along with his wife and minor children with the object of setting up a tin printing factory but it had not commenced production. During the previous year relevant to the assessment year in question, a total of Rs. 1,68,334 was advanced to the firm from the assessee's tin factory. The assessee contended that the advance made to the firm was an amount spent for his own business and hence the interest incurred by the assessee for raising lean for the business of the firm was an allowable expenditure, but the Appellate Tribunal repelled that contention. On a reference to the High Court: Held, that the decision of the Tribunal was not justified. The business carried on by the firm, whether the firm is registered or not, in which the assessee is a partner, would be a business carried on by the assessee and the assessee's share in the profit or loss of the firm would be liable to be taken into account in the computation of his income under section 10 of the Act, and the interest incurred by the assessee for raising loan for the purpose of the firm is an allowable item of expenditure in computing the income of the assessee. Shantikumar Narottam Mororji v. Commissioner of Income tax (1955) 27 I T R 69 and Commissioner of Income-tax v. Jethalal Zaverchand Patalia (1966) 61 I T R 357 fol. Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax (1953) 23 I T R 82; Arunachalam Chettiar v. Commissioner of Income-tax (1936) 4 I T R 173 (P C); Commissioner of Income-tax v. Muthuraman Chettiar (1962) 44 I T R 710 (S C); Muthuraman Chettiar v. Commissioner of Income-tax (1957) 31 I T R 61 and Seth Sorabji Framji Kerawala v. Commissioner of Income-tax (1962) 45 I T R 454 ref. JUDGMENT ISAAC, J.------These two references have been made by the Madras Bench of the Income-tax Appellate Tribunal under sec tion 66(2) of the Indian Income-tax Act, 1922, as directed by this Court on the applications made by the…