1980 (5) TMI 58 - AT - Income Tax

Summary

Issues:
1. Deductibility of interest paid on borrowings for investment in shares under the head "other sources".

Analysis:
The case involved an individual assessee deriving income from property and earning commission from a company. The issue at hand was the deductibility of interest paid on borrowings for investment in shares under the head "other sources". The Income Tax Officer (ITO) disallowed the deduction claimed by the assessee on the grounds that there was no income chargeable under the head "other sources" in the relevant year. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the ITO's decision, citing judicial authorities to support their stance.

The counsel for the assessee argued that despite the shares not yielding any dividend income, the claim for deduction of interest under the head "other sources" should not be rejected. Reference was made to a Supreme Court decision and the account details of the assessee to support this argument. On the other hand, the Revenue's representative contended that the factual position was not fully investigated by the authorities below, and thus, the matter should be sent back for further examination.

Upon review, the Appellate Tribunal noted the Supreme Court's interpretation that the expenditure must be laid out wholly or exclusively for the purpose of making or earning income, without the requirement that income must actually be earned. The Tribunal found merit in the assessee's claim, emphasizing that there were no doubts regarding the factual aspects of the case. The Tribunal highlighted that the loans were borrowed for investment in shares, and the balance sheets of the assessee supported this transaction. As such, the Tribunal allowed the assessee's claim for deduction of interest under the head "other sources" and directed modification of the assessment accordingly.

In conclusion, the appeal was allowed in favor of the assessee, establishing the deductibility of interest paid on borrowings for investment in shares under the head "other sources" based on the Supreme Court's interpretation and the factual clarity of the case.