1984 (8) TMI 49 - HC - Income Tax

Bad Debt Deduction Interest On Borrowed Capital Money Lending Other Sources Special Deduction

Summary

Issues Involved:
The judgment involves the following Issues:
1. Allowability of interest paid to Shri K. J. Somaiya against dividend income u/s 57(iii) of the Income-tax Act, 1961 for the assessment years 1968-69 and 1969-70.
2. Entitlement to the allowance of bad debt against business income for the assessment years 1968-69 and 1969-70.
3. Allowability of a specific amount against business income for the assessment year 1968-69.

Issue 1 - Interest Payment to Shri K. J. Somaiya:
The assessee paid interest to Shri K. J. Somaiya for acquiring shares which were immediately donated to a charitable trust. The Tribunal disallowed the deduction of this interest, stating it was not paid for acquiring an income-earning asset. The court upheld this decision, citing the provisions of section 57 of the Income-tax Act, 1961, and ruled in favor of the Revenue for both assessment years.

Issue 2 - Bad Debt Claim:
The assessee claimed bad debts written off for the assessment years 1968-69 and 1969-70. The Tribunal concluded that the advances made did not establish a money-lending business, as requested details were not provided. The court found this conclusion based on factual material and not improper, ruling against the assessee for both years regarding the bad debt claim.

Issue 3 - Allowance of Specific Amount:
For the assessment year 1968-69, the assessee claimed an amount against business income, part of which was paid directly to the income-tax Department for delayed payment of income tax. The court allowed a portion of this amount, specifically Rs. 1,374, as a deduction to the assessee, stating that tax law permits such deductions and finding the claim valid.

In conclusion, the court ruled against the assessee on all issues for both assessment years, except for allowing a specific amount as a deduction against business income for the assessment year 1968-69. The assessee was directed to pay the costs of the reference to the Commissioner.