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TMI Blog1971 (7) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... lary, properties and dividends. At the end of S.Y. 2014, corresponding to the assessment year 1959-60, his liabilities included an overdraft from the Bank of India Ltd., Kalbadevi branch, in the sum of Rs. 1,63,904 and loans from sundry creditors amounting to Rs 2,94,206. Among other items of income, he returned an income of Rs. 27,677 from dividends and claimed against it a deduction of Rs. 18,934 which was made up of interest at Rs. 9,408 paid to the bank and interest at Rs. 9,526 paid to the other creditors. The Income-tax Officer and the Appellate Assistant Commissioner allowed the whole of the deduction as a business loss under section 10(2)(iii and not under section 12(2) of the Income-tax Act, 1922, as claimed by the assessee. By a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very kind which may be included in his total income if not included under any of the heads preceding. Under section 12(1A), income from other sources includes income from dividends. Section 12(2) under which the assessee claims deduction provides, to the extent material, that such income shall be computed after making allowance for any expenditure incurred solely for the purpose of earning such income. The question therefore which requires consideration is whether the interest paid by the assessee to the bank on the overdraft account is an expenditure incurred by him solely for the purpose of earning the dividends. The Tribunal has not applied its mind to the provisions of section 12(2) at all and has allowed the deduction partially, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed separately under section 12 and only such expenditure can be allowed as a deduction as is specifically provided for in the several sub-sections of that section. In regard to the income earned from dividends what the law allows is a deduction of expenditure incurred solely for the purpose of earning the dividends and any reasonable sum paid by way of commission or remuneration to a banker or any other person realising the dividend on behalf of the assessee. The initial difficulty in the way of the assessee is that he failed to show that the overdraft account was created for the purpose of buying the shares. Consequently, he failed in establishing the important requirement that expenditure in the shape of payment of interest was inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest has to be the making or earning of the dividend income. " The mere fact that income by way of dividend has accrued and that the expenditure incurred is in some manner or other related to the accrual of the dividend income is not sufficient." As in the case cited above so in the instant case, the borrowing of the by way of overdraft from the bank was not for the purpose of acquiring shares with the object and purpose of earning dividend on those shares and therefore section 12(2) can have no application. But, Mr. Das toor appearing on behalf of the assessee argues that the trial balance-sheet which was produced in the ment proceedings shows that though the was, by and large, a speculator, he had purchased certain shares wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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