PADMAVATI JAYKRISHNA SMT Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question which is involved in this reference is whether the applicant -assessee is entitled to claim deduction as regards the payment of interest to the extent of Rs. 10,279 against the 'income from others sources' under clause (iii) of section 57 of the Income -tax Act. 1961, which is hereinafter referred to as 'the Act'. The facts of the case show that the applicant -assessee derives income from other sources in the shape of interest and dividends. The assessment with which we are concerned in this reference is for the year 1966 -67. During the course of the assessment, it was found that the applicant assessee had borrowed loan from the Estate of Harivallabhadas Kalidas. During the accounting period the amount of this loan was of Rs. 5,00,055. Interest paid on this amount during the accounting period was Rs. 26,986 should be allowed as permissible deduction under clause (iii) of section 57 of the Act which says that while computing the chargeable income under the head 'income from other sources' any expenditure, not being in the nature of capital expenditure, laid out or expended wholly or exclusively for the purpose to making or earning such income, should be deducted The Income -tax Officer, who carried out the assessment worked out, on proportionate basis with reference to withdrawals, and the balance available, the interest amount of Rs. 10,279 which alone could be considered for the purpose of meeting her tax liabilities such as income -tax and wealth -tax as well as for the purpose of making annuity deposit. But this deduction was not allowed by the Income -tax Officer as, in his opinion, the case did not fall within clause (iii) of section 57 in view of the decision given by the High Court of Bombay in Bai Bhuriben Lallubhai v. Commissioner of Income -tax. Being aggrieved by this decision, the applicant -assessee approached the Appellant Tribunal. But even the Appellate Tribunal confirmed the department's view and held that the loans in question were taken for the purpose of meeting the obligations of personal character inasmuch as the loans were utilised for the purpose of paying income -tax, wealth -tax and annuity deposit liabilities According to the Tribunal, therefore, the interest paid on these loans had nothing to do with the earning of income from the other sources. One more contention before the Tribunal was that at any rate the loan amount of Rs. 26,000 and odd was taken on interest for the purpose of making annuity deposit which could earn interest to the assessee and, therefore, at least, so far as the interest paid on this loan amount is concerned, the same should be deducted under section 57(iii) of the Act. Even this contention of the assessee was rejected by the Tribunal on the ground that the deposit by way of annuity was, at the relevant time, her statutory obligation and earning of interest thereon was merely incidental and, therefore, even the interest paid on the loan amount taken for making this deposit would not be covered by clause (iii) of section 57.

(2.) BEING aggrieved by this decision of the Tribunal the assessee has preferred this reference in which the Tribunal has referred the following question to us for our opinion :

(3.) IT was also pointed out on behalf of the assessee that the ratio of the decision in Bhuriben's case is no longer hood in view of the decisions given by the Supreme Court in Eastern Investments Ltd. v. Commissioner of Income -tax to and Indian Aluminum Co. Ltd. v. Commissioner of Income -tax.