Law:

Section:

section 67(3) of the income-tax act, 1961-partner-method of computing a partner's shake in the income of the firm-assessee paid interest on capital borrowed for investment in firm-firm utilised that capital for payment of taxes-whether, in computing assessee's income in respect of its share in the income of the firm, interest paid by it could be deducted-held, yes Facts The assessee, an HUF, borrowed Rs. 79,609 and invested the same with a firm in which it was a partner. The firm utilised the amount for payment of taxes. The assessee claimed that the interest paid on the amount borrowed by it was a deductible expenditure. The ITO disallowed the claim on the ground that the firm utilised the amount for payment of taxes. The AAC upheld the ITO's order but the Tribunal allowed the claim of the assessee. On reference : Held Section 67(3) does not stipulate that the interest would not be admissible if the amount given to the firm was not used by it for the purpose of its business. In view of the express provisions of the section, the assessee's claim should be allowed. JUDGMENT Deb, J.-This is a reference under section 256(1) of the Income-tax, Act 1961. It relates to the assessment of 1966-67 and the question before us is as follows : "Whether, on the facts and in the circumstances of the case and on a correct interpretation of section 67(3) of the Income-tax Act, 1961, the Tribunal was right in holding that the interest of Rs. 79,609 was an allowable deduction in computing the share of the assessee in the income of the firm, M/s. Soorajmull Nagarmull ?" The assessee is an HUF. The…

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