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Section 57 of the Income-tax Act, 1961 – Income form other sources – Deductions – Assessment years 1965-66 and 1966-67 – Whether even if no profit is earned from shares by way of dividend, deduction of interest paid on loans invested for acquisition of shares is deductible as an expense – Held, yes FACTS The assessee borrowed monies for purchase of shares. During the relevant assessment years, assessee had to pay interest on the loans and claimed deduction thereof. The ITO disallowed the claim on the ground that in the years of assessment, the shares purchased by the assessee yielded no dividend. The disallowance was upheld by the AAC. On further appeal, the Tribunal allowed the claim of deduction holding that regardless of the fact whether the shares yielded dividend or not, payment of interest was allowable as a deduction. On reference: HELD Even if no profit is earned from the shares by way of dividend, the deduction of interest paid on the loans invested for acquisition of shares is deductible as an expense. Note : The case was decided in favour of the assessee. CASES REFERRED TO Appa Rao v. CIT [1962] 46 ITR 511 (Mad.), Chhail Behari Lal v. CIT [1960] 39 ITR 696 (All.), CIT v. Dr. Fida Hussain G. Abbasi [1969] 71 ITR 314 (MP), Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC), Kameshwar Singhv. CIT [1957] 32 ITR 377 (Pat.), Madanlal Sohanlal v. CIT [1963] 47 ITR 1 (Cal.), Seth Banarsi Das Gupta v. CIT[1971] 81 ITR 170 (All.) and Ormerods (India) (P.) Ltd. v. CIT [1959] 36 ITR 329 (Bom.). JUDGMENT R.N. Misra, J.—These are two references made under section 256(1) of the Income-tax Act, 1961 (hereinafter reference to as "the Act"), by the Income-tax Appellate Tribunal on an application of the revenue and the following question has been sent for opinion of the court: "Whether, on the facts and in the circumstances of the case, the interest on monies borrowed for purchase of shares should be allowed as a deduction even though shares had not yielded any dividend in the relevant accounting year?" The relevant years of assessment are 1965-66 and 1966-67. Assessee, an individual, purchased equity shares in M/s. Kalinga Tubes Ltd. by borrowing from M/s. Kalinga…

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