9911796707
|
Home
Issues Involved:
1. Deduction of interest amount under Section 9(1)(iv) of the Indian Income-tax Act. 2. Deduction of interest amount under Section 10(2)(iii) of the Indian Income-tax Act. 3. Deduction of interest amount under Section 10(2)(xii) of the Indian Income-tax Act. Issue-wise Detailed Analysis: 1. Deduction of interest amount under Section 9(1)(iv) of the Indian Income-tax Act: The appellant claimed a deduction of Rs. 1,361 under Section 9(1)(iv) of the Indian Income-tax Act, which pertains to "Income from property." This section allows for the deduction of interest on a mortgage or other capital charge. The appellant argued that the property was subject to a capital charge due to the provisions in the building agreement, which invoked the Bombay City Land Revenue Act, 1876. Specifically, the appellant pointed to Section 10 of that Act, which makes arrears of land revenue a permanent charge on the land. However, the court concluded that no existing charge was present at the time since the charge only arises upon default and notice, neither of which had occurred. Therefore, the property was not subject to a capital charge within the meaning of Section 9(1)(iv), and the deduction was disallowed. 2. Deduction of interest amount under Section 10(2)(iii) of the Indian Income-tax Act: The appellant also sought a deduction of Rs. 8,464 under Section 10(2)(iii), which deals with "Profits and gains from business, profession or vocation" and allows for the deduction of interest on capital borrowed for business purposes. The court examined the building agreement and determined that the transaction did not constitute borrowing of capital. The agreement was essentially a purchase of a capital asset on long-term credit with interest on unpaid instalments, not a loan transaction. Therefore, the interest paid did not qualify as interest on borrowed capital for business purposes, and the deduction was disallowed. 3. Deduction of interest amount under Section 10(2)(xii) of the Indian Income-tax Act: The appellant additionally argued for a deduction under Section 10(2)(xii), which allows for the deduction of any expenditure laid out wholly and exclusively for business purposes. The court found that the interest payment on unpaid instalments could not be considered wholly or exclusively for business purposes. The payment was tied to the acquisition of the leasehold interest and would still be required even if the cinema business ceased operations. Thus, the interest payment did not qualify as an expenditure wholly or exclusively for business purposes, and the deduction was disallowed. Conclusion: The court concluded that the interest payment did not qualify for deductions under any of the claimed sections of the Indian Income-tax Act. The question submitted by the Tribunal was answered in the negative, and the appellant was ordered to pay the costs of the reference.
|
