AMARCHAND JALAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case, eight applications under S. 256(1) of the INCOME TAX ACT, 1961, were made by the assessee and the other eight applications were filed by the CIT (Central), Bombay. On these applications, the following questions have been referred to us for our determination in this reference under s. 256(1) of the said Act:

(2.) THE first two questions have been referred to us at the instance of the assessee and the third question has been referred to us at the instance of the CIT.

(3.) THE assessee is an individual and the assessment years involved are 1963 -64 to 1970 -71, both inclusive. The relevant accounting periods are the accounting years, Samvat years 2018 to 2025. The assessee borrowed certain amounts from M/s Amarchand Dharamchand and utilised a part of these amounts in acquiring shares in his own name and the rest of them in acquiring shares in the names of his wife and minor son, respectively. In the relevant previous years, certain amounts were debited as interest payments to M/s Amarchand Dharamchand, being on account of interest payable on the amounts borrowed. The assessee claimed these amounts as deductions permissible under S. 57(iii) of the INCOME TAX ACT, 1961, as being the expenditure laid out and expended for the purpose of earning income chargeable under the head "Income from other sources" The ITO disallowed the claim in respect of all the above amounts, as there was no corresponding source of income and on the ground that it was not explained as to how the withdrawals from M/s Amarchand Dharamchand had been utilised. The assessee filed appeals against the decision of the ITO to the aforesaid effect in the said assessment years. The assessee placed before the AAC the details of investments which showed that a part of these amounts had been invested by the assessee in purchasing shares in his own name and the balance in purchasing shares in the names of his wife and minor son respectively as set out above. The AAC found that the assessee had utilised a part of the borrowings from M/s Amarchand Dharamchand for purchasing shares in the names of his wife and minor son. He allowed a deduction in respect of interest on the amounts borrowed from the said firm and utilised by the assessee for investment in purchase of shares in his own name. As far as the amounts utilised for purchasing shares in the names of wife and minor son were concerned, he allowed deduction of interest only against and to the extent of the dividend income received by the wife and the minor son which was included in the income of the assessee under S. 64 of the IT Act 1961. This decision of the AAC was confirmed by the Tribunal on appeals filed by the assessee. It is the correctness of this decision of the Tribunal which is sought to be challenged by way of questions referred to us.