Law:

Section:

Income-tax---Income from other sources--Deduction--Interest on amount of loan utilised to meet taxes and annuity deposit, being not an expenditure incurred wholly and exclusively for purpose of income, held, was not allowable deduction. Bai Bhuriben Lallubhai v. C.I.T. (1956) 29 I T R 543 (Bom); C.I.T. v. Rajendra Prasad Moody (1978) 115 I T R 519 (S.C.) and Eastern Investments Ltd. v. C.I.T. (1951) 20 I T R 1 (S C) ref. JUDGMENT RANGANATH MISRA, J.-- This appeal by certificate is directed against the judgment of the High Court of Gujarat. The assessee is assessed as an individual and she derived income from "other sources in the shape of interest, dividend, etc. The relevant year of assessment is 1966-67. During this year, the assessee claimed deduction of Rs.26,986 being interest paid to Harivallabhdas Kalidas Estate on loans taken by her. The Income-tax Officer found that out of the loans, real investment was for a sum of Rs.1,250 only. He disallowed the claim to the extent of Rs.10,279 on proportionate basis. According to him, this claim could not be admitted under section 57 (iii) of the Income Tax Act, 1961. Assessees first appeal to the Appellate Assistant Commissioner was rejected. The. Appellate Authority relied upon the ratio of the decision of the Bombay High Court in Bai Bhuriben Lallubhai v. C.I.T. (1956) 29 I T R 543 and dismissed the appeal. In further appeal before the Tribunal, the claim of the assessee was reiterated by contending that expenditure under the head of payment of income-tax and wealth-tax and annuity deposits should have been taken as revenue expenditure and the claim of interest in respect of such loans should have been admitted. It was further contended that the assessee instead of liquidating the investments which were return-oriented, found it commercially expedient and viable to raise a loan instead of disturbing the investments and, therefore, the claim became admissible in law. The Tribunal did not accept this contention and observed that the loans were taken for meeting her personal obligation like payment of taxes and deposit of annuity and these had nothing to do with the business. The Tribunal also relied upon the ratio…

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