CHHAIL BEHARI LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred for the opinion of this court is Whether the assessee in each case is entitled to a deduction of the sum of Rs. 6,688 being interest paid during the relevant previous year on money borrowed to buy shares in the Bijli Cotton Mills Ltd., which shares yielded no income, from his other income, profits and gains, in order to arrive at his correct taxable income ?

(2.) THE facts of this case are very brief and simple. Both the assessees were partners in a firm Shiam Lal Chiman Lal. THEy earned incomes from the firm as also from some property and as interest on deposits made by them as a Hindu undivided family, viz., Shiam Lal Chiman Lal. From the firm each of these assessees borrowed a sum of Rs. 2,50,000 to buy shares in the Bijli Cotton Mills Ltd. THE shares of the Bijli Cotton Mills Ltd., were actually purchased by them but during the relevant previous year no dividends were received by them on these shares. THEy however had to pay a sum of Rs. 6,688 each as intererst to the partnership firm Shiam Lal Chiman Lal form which they had borrowed the sum of Rs. 2,50,000 each for the purpose of purchasing those shares. It was claimed by each of the assessees that this sum of Rs. 6,688 paid as interest by each of them was a deductible expenditure under section 1292) of the Income-tax Act when computing the income from dividends on shares of the Bijli Cotton Mills Ltd. and since no actual dividends were received it should be held that each of them suffered a loss to the extent of Rs. 6,688 and that loss should be set off under section 24(I) of the Income-tax Act against th eir income from the other heads which has been mentioned above. THE Income-tax Appellate Tribunal refused to allow this set-off and consequently on teh request of the assessees the question mentioned above has been referred for our opinion.