9911796707
TMI Blog1999 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... 976-77, Rs. 44,500 for the assessment year 1977-78 and Rs. 55,445 for the assessment year 1978-79 ?" The assessee is an individual. He was a partner of the firm, M. C. Ghia and Co. His personal account in the firm had been treated somewhat like a current account. His income was credited in that account, similarly, his drawing, payment of taxes, etc., were debited in that account. The partnership deed did not stipulate that the partners would be debited with interest. Nevertheless, interest was charged on the debit balances. The interest debited in the account of the assessee was Rs. 1,47,257 for the assessment year 1976-77, Rs. 1,04,552 for the assessment year 1977-78 and Rs. 1,16,686 for the assessment year 1978-79. There was brought for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the tax payments were made from the withdrawals, He also agreed with the Income-tax Officer that the allowance under section 80V of the Act would be limited only to such interest on the borrowing made for payment of taxes after April 1, 1976, when this relevant section came into operation. The assessee appealed to the Income-tax Appellate Tribunal ("the Tribunal"). The Tribunal did not agree with the opinion of the Commissioner of Income-tax (Appeals) that the interest on borrowings made for payment of taxes after coming into force of section 80V of the Act only was allowable as a deduction under that section. In other words, according to the Tribunal, section 80V of the Act was applicable even to interest paid on borrowings made prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be allowed as a deduction under section 80V of the Act in the absence of a specific finding that the borrowing was for the purpose of payment of taxes under the Act. He further submitted that this section provides for deduction of interest only on monies borrowed for the payment of any tax due from the assessee under the Act and not on borrowed money utilised for the payment of tax. Reliance was placed in support of this contention on the decision of this court in Hindustan Cocoa Products Ltd. v. CIT [1999] 236 ITR 140. Ms. V. B. Patel, learned counsel for the assessee, on the other hand, submitted that the benefit of this section is also available in respect of interest paid on monies borrowed even prior to the coming into force of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be specifically for the purpose of payment of tax under the Act. In other words, there should be a direct nexus between the borrowings and the payment of taxes. No deduction under this section can be claimed on account of interest paid on borrowed money on the ground that part of it was used by the assessee for payment of taxes. In the instant case, there is no borrowing for the purpose of payment of taxes. The debit balance in the account had been there right from the beginning and there were withdrawals as well as deposits in the said account. There is no direct nexus between the withdrawals and the payment of tax. Even if the withdrawals are held to be borrowings and it is held that the interest paid on the borrowings made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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