1975 (11) TMI 11 - HC - Income Tax

Summary

Issues Involved:
The issue involves the deduction of interest on monies borrowed for the purchase of shares when the shares did not yield any dividend in the relevant accounting year.

Judgment Details:

1. Background and Facts:
The case involved two references made u/s 256(1) of the Income-tax Act, 1961 by the Income-tax Appellate Tribunal regarding the deduction of interest on loans taken for purchasing shares. The assessee, an individual, purchased equity shares in a company by borrowing from two entities. The Income-tax Officer disallowed the interest deduction claim as the shares did not yield any dividend during the relevant years.

2. Tribunal's Decision:
The Tribunal allowed the deduction claim, stating that regardless of dividend earnings, the payment of interest on borrowed money for share purchase was allowable as a deduction.

3. Revenue's Argument:
The revenue contended that the Tribunal's decision contradicted the provisions of the Act, specifically referring to section 57 which outlines deductions under the head 'Income from other sources.'

4. Precedents and Legal Analysis:
The revenue relied on past judgments such as Kameshwar Singh v. Commissioner of Income-tax and Madanlal Sohanlal v. Commissioner of Income-tax to support their argument that interest deduction is not admissible unless dividends are earned from the shares.

5. Court's Decision:
The High Court analyzed the provisions of the Act and compared them to past judgments. It concluded that interest paid on loans for purchasing shares is deductible as an expense, even if no dividend income is earned. The Court referenced decisions from various High Courts to support this interpretation.

6. Final Verdict:
The Court answered the referred question by stating that interest on borrowed money for share purchase should be allowed as a deduction, irrespective of dividend earnings. No costs were awarded in the case.

Judge's Concurrence:
Justice Panda agreed with the judgment delivered by Justice Mishra.

This summary provides a detailed overview of the legal judgment, including the issues involved, background facts, arguments presented, legal analysis, court's decision, and the final verdict.