COMMISSIONER OF INCOME TAX Vs. ANANTH G PAI

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question of law under s. 256(1) of the I.T. Act, 1961, for the opinion of this court :

(2.) DURING the previous year relevant to the assessment year 1977-78, the assessee withdrew his fixed deposit amount from a bank prematurely in order to invest the said amount on shares in companies. Consequently, the assessee had to repay a sum of Rs. 10,733 being the interest paid in excess by the bank. The assessee claimed deduction of the said sum under s. 57(iii) of the Act in the assessment. This claim was negatived by the ITO on the ground that there was no nexus between the payment of interest and the investment in shares.

(3.) IT is not in dispute that the assessee withdrew the amount from the fixed deposit before maturity for the purpose of purchase of shares. The assessee claimed a sum of Rs. 10,733 paid back by the assessee to the bank as an allowable deduction in the assessment. IT is also not in dispute that the amount withdrawn was invested in the purchase of shares. The assessee had to repay a sum of Rs. 10,733, a portion of the interest paid to him in excess, on account of the premature termination of the fixed deposit.