Law: Income Tax Act, 1922

Section: 10(2)(iii)

Income-tax Act (XI of 1922)---------S. 10 (2) (iii)-Interest Unregistered partnership-Partner borrowing money for purposes of business of unregistered firm-Interest paid by partner on money borrrowed-Whether allowable deduction in partners assessment. The assessee, who was partner in two unregistered firms borrowed money from three persons for the use of the two unregistered firms. He paid interest amounting to Rs. 5,086 on his borrowings and he claimed deduction of the interest under section 10 (2) (iii) of the Income-tax Act in computing his individual income Held, that deduction under section 10 (2) (iii) of the Income-tax Act was allowable only in respect of capital borrowed for the purposes of the business, profession or vocation which was assessed to tax and, therefore, if money was borrowed for the purposes of a business the profits of which were not assessable under the Act, then no deduction could be made under clause (iii) in respect of the interest paid on such borrowings. The tax in regard to the profits of the unregistered firms in which the assessee was a partner was assessed on and payable by the firms themselves. The share of profits received by the assessee from these firms was not taxable in his hands and, therefore, no deduction could be claimed by him under section 10 (2) (iii) in respect of the amount of interest paid by him. Shantikumar v. Commissioner of Income-tax (1955) 27 I T R 69 distinguished. Provident Investment Co. In re (1932) 2 Comp. Cas. 312 and Commissioner of Income-tax v. Somasundoram Chettiar (1928) A I R 1928 Mad. 487 ref. JUDGMENT DIXIT, C. J.-This reference under section 66 (1) of the Indian Income-tax Act relates to the assessment to income-tax of one Sorabji-Frarnji Kerawala as an individual. The question referred for the decision of this Court by the Income-tax Appellate Tribunal is as follows: "Whether interest paid by the assessee on money borrowed from outsiders for making advances to the firms in which he was a partner is allowable as a deduction while computing his individual income for the purpose of assessment ?" The assessee is a partner in two unregistered firms known as the Nimar Cotton Press Factory and the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492