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TMI Blog1990 (10) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the purpose of investment in the firm in which he is a partner either under section 67(3) or section 36(1)(iii) of the Income-tax Act, 1961 ?" The facts are that the assessee, an individual, is a partner in the firm, East India Transport Agency. The said firm changed its accounting year from Ram Navami to June 30, as a result of which there was no assessment of the firm for the assessment year 1981-82. The assessee, accordingly, had no share income from the said firm and for the assessment years under consideration the assessee has not, therefore, shown any income from the firm. However, before the Income-tax Officer the assessee claimed that interest to the tune of Rs. 29,195 paid by him on the capital borrowed for investment in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year. The Appellate Assistant Commissioner noted that the borrowing of the loan capital and the payment of interest amount are not in dispute. He was of the view that the assessee suffered a loss by way of payment of interest on the borrowed capital during the relevant previous year and so as per the provision of section 70(1) he is entitled to set off the loss against the income of the said year. The Income-tax Officer was accordingly directed to allow deduction of the interest amount of Rs. 29,195 from the business income of the assessee for the year. Aggrieved by the order of the Appellate Assistant Commissioner, the Department came up in second appeal before the Tribunal. The Tribunal held that in order to justify a claim under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare income from that firm and that when a deduction under the provision of section 67(3) is negatived, the assessee cannot fall back upon section 36(1)(iii). For the reasons aforesaid we are of the view that the assessee is not entitled to deduction on account of the interest paid by him on the capital borrowed for the purpose of investment in the firm in which he was a partner inasmuch as he had no share income from the firm where such investment was made. He is also not entitled to get the benefit under section 36(1)(iii) as no capital was borrowed for the purpose of carrying on any business by him in his individual capacity. For the reasons aforesaid, we answer this question in the affirmative and in favour of the Revenue and agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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