Law:

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- Sections 5(k) and 5(e) - Madras Agricultural Income-tax Act, 1955 CASE REFERRED TO G.J. Coelho v. State of Madras [1960] 40 I.T.R. 686. JUDGMENT Jagadisan, J. - A tea and coffee estate named Havukal estate at Kotagiri is owned by a firm consisting of nine partners. The petitioners are some of the partners. The firm is registered under the provisions of the Madras Agricultural Income-tax Act for the year of assessment 1958-59 (accounting period May 1, 1957, to March 31, 1958). The petitioners had borrowed moneys from money-lenders and bankers for contributing towards the purchase price of the acquisition of the estate. The Agricultural Income-tax Officer determined the assessable income of the firm from the estate as 60% of the total income determined by the Income-tax Officer acting under the Indian Income-tax Act. Each one of these petitioners claimed by way of deduction 60% of the interest paid on their respective capital borrowing. In computing the income under the Indian Income-tax Act the petitioners were allowed deduction to the extent of 40% on their borrowed capital as 40% of the income alone was taxable under that Act. The claim to deduct interest on borrowed capital, to the extent of 60%, in computing the petitioners' share of the agricultural income having been negatived by the taxing authorities as well as by the Appellate Tribunal, these revision petitions have been preferred. 2. The particulars of interest paid and the claim for deduction against agricultural income by the petitioners are given in the tabular statement below: Name of party Total interest paid Claim against agricultural income-60% Claim against business income allowed-40% Rs. Rs. Rs. 1. Perianna Pillai 3,490 2,094 1,396 Kamakshi Ammal (wife) 349 290 140 2. M. Thangavelu 3,490 2,094 1,396 3. M. Rangaswamy 3,490 2,094 1.396 4 M. Ramaswamy 3,490 2,094 1,396 5. C. Ramaswamy 3,490 2,094 1,396 6. S.R. Arunachalam 3,490 2,094 1,396 3. The sole question that arises for determination is whether a partner of a registered firm earning agricultural income is entitled to claim by way of deduction interest paid on the capital borrowed by him for acquiring the estate giving rise to the income.…

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