Law:

Section:

(a) Constitution of Pakistan (1973)-----Art. 185(3)--Income-tax Act (XI of 1922), S. 10(2)--Leave to appeal granted to consider question whether S.10(2) of Income-tax Act, 1922 contemplated that need for borrowed capital should have arisen because funds available out of companys own finances were insufficient and that it could not be intention of law to provide facilities for Directors of a company to serve their personal ends by utilising funds of company without paying interest and to burden company with interest instead. (b) Income-tax Act (XI of 1922)----Ss. 10(2) (iii) & 23(3)--Deductions--Interests paid on loan and substantial amount borrowed free of interest by Managing Director-­Assessee is free to carry on a business with his own capital or from money borrowed from any bank or other financial institution and it is only in case where assessee chooses to run his business with borrowed capital that he would be entitled to deduction in respect of amount paid for and on account of interest--Only eventuality, which could disentitle an assessee to claim deduction of whole or any part of interest, is where amount is not shown to have been used as capital in business carried on by assessee--Income-tax Officer having entire account including cash book and bank accounts before him and completing assessment under S.23(3) of Income-tax Act but failing to show that any part of borrowed money was not used in business and was diverted to personal use of Director--Finding of fact recorded by Tribunal that whole of capital was used for purposes of company--No provision existing in Income-tax Act to prevent a company from advancing money to Director or shareholder which could operate as a bar to making of advances by companies to their Directors--Order of High Court upholding finding of Tribunal on question of fact maintained. (c) Income-tax Act (XI of 1922)-----Ss. 10(2), 23(3) & 66--Finding of fact given by Tribunal--High Court, held, would not go behind finding of fact given by Tribunal even on ground that there was no evidence to support it, unless it was first expressly challenged by a question raised in reference application--If no question was framed to…

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