PREM NAZIR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference application has been filed by the assessee seeking a direction to the Income-tax Tribunal from this court to refer the following three questions for the opinion of this court :

(2.) THE assessee is a cine artiste. During the relevant accounting year relating to the assessment year 1977-78, the assessee had borrowed a sum of Rs. 3 lakhs from various persons agreeing to pay interest at 15 per cent. for utilising the said amount for investment in afirm called Sevenseas International. However, the said firm did not commence its business at all and the assessee got no share income from the said partnership. THE assessee claimed deduction in respect of the interest paid on the capital borrowed as against his total income, which is mainly from his profession as a cine artiste. THE assessing authority rejected the said claim on the ground that deduction can be allowed under section 67(3) of the Income-tax Act, 1961, hereinafter referred to as "the Act", only against the assessee's share income from the partnership and when there is no share income actually received from the partnership, there is no question of deduction of interest paid on the capital invested in the partnership. THE matter was taken in appeal to the Commissioner of Income-tax (Appeals). THE appellate authority also agreed with the view of the original authority that the assessee is not entitled to deduction of the interest paid on the borrowed capital as against his total income, which admittedly did not include any share of income from the partnership. THE assessee took the matter in appeal to the Tribunal. THE Tribunal, however, upheld the view of the appellate authority and held that deduction cannot be allowed under section 67(3) of the Act on the facts and circumstances of the case. THE view taken by the Tribunal that section 67(3) will not stand attracted, on the facts and circumstances of this case, is sought to be challenged by seeking a reference to this court.