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Issues Involved:
1. Whether the sum of Rs. 20,124 was allowable as a deduction as interest on borrowed capital within the meaning of Section 10(2)(iii) of the Indian Income-tax Act, 1922. Issue-wise Detailed Analysis: 1. Allowability of Deduction as Interest on Borrowed Capital: The primary issue in this case was whether the sum of Rs. 20,124 could be allowed as a deduction under Section 10(2)(iii) of the Indian Income-tax Act, 1922, as interest on borrowed capital. The assessee was assessed to income-tax for the year 1942-43 on a total income of Rs. 70,766, which included Rs. 46,061 from his business of ice manufacture and cold storage. He claimed a deduction of Rs. 22,108 as interest paid to his father's estate, but the Income-tax authorities disallowed this except for Rs. 1,984, arguing that the assessee had become the sole owner of the estate and thus the payment was essentially to himself. The Appellate Tribunal, however, held that the estate's administration was not complete, and the residue was not yet the assessee's property, thereby allowing the appeal and excluding the balance of Rs. 20,124 from the assessment. 2. Interpretation of the Will and Codicil: The will of John Ramsay Unger, the assessee's father, and its codicil played a crucial role in this case. The will confirmed the partnership agreement and outlined specific pecuniary legacies to be paid in installments. The residue of the estate was to be divided after the deaths of Emilie Unger and Mary Elizabeth Unger. The Tribunal found that the assessee was maintaining separate accounts for the estate as executor, crediting interest received and debiting legacies paid, and this was done bona fide according to the will's directions. 3. Legal Arguments and Precedents: The Commissioner of Income-tax argued that the assessee, by paying the legacies, had assented to them, making the legatees' titles perfect, and thus the residue should be considered the assessee's property. The assessee contended that the gifts of the residue were contingent on the survival of the first-named legatees at the time of distribution, which was to occur after the deaths of Emilie Unger and Mary Elizabeth Unger. The court referred to legal principles from Jarman on Wills and cases like Re Eve and Browne v. Moody to interpret the will, concluding that the gifts were contingent and the residue had not vested in the assessee. 4. Conclusion and Judgment: The court concluded that the gifts of the residue were contingent upon the survival of the first-named legatee in each case after the deaths of Emilie Unger and Mary Elizabeth Unger. Since both were alive, the residue remained part of the testator's estate in the hands of the assessee as executor. The amount credited to the estate in Ramsay & Co.'s books was considered borrowed capital, and the interest debited was allowed as interest paid on such capital. Thus, the sum of Rs. 20,124 was allowable as a deduction under Section 10(2)(iii) of the Act. This comprehensive analysis preserves the legal terminology and significant phrases from the original text, providing a thorough understanding of the judgment while maintaining the privacy of the parties involved.
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