ABDULHUSSEIN G TAMBAWALA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961 ("Act") at the instance of the assessee, the Tribunal has referred the following question of law to this Court for opinion:

(2.) THE material facts of the case giving rise to this reference are as follows: The assessee is an individual whose main source of income is remuneration from M/s Hoosein Metal Rolling Mills (P) Ltd., income from dividends and director's fees. This reference pertains to asst. years 1977 78, 1978 79 and 1979 80. The controversy in all these three years is regarding the allowability of interest under S. 80V of the Act on moneys borrowed by the assessee. Admittedly, the moneys were borrowed by the assessee for repayment of interest free loans obtained by the assessee between the years 1961 to 1970 for payment of income tax. The assessee claimed deduction of the amount of interest paid by him in computation of his income under S. 80V of the Act. This claim of the assessee was rejected by the ITO on the ground that the claim of the assessee for deduction of interest on such loan was not permissible under S. 80V of the Act because the interest claimed by the assessee was not interest paid on moneys borrowed by assessee for payment of any tax due under the Act. The order of the ITO was affirmed by the CIT (A) as also by the Tribunal. Hence this reference at the instance of the assessee.

(3.) WE have carefully considered the above submission of Mrs. Garg, learned counsel for the assessee. Sec. 80V of the Act was inserted in the Act by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976 to provide for deduction of interest on any money borrowed for payment of any tax under the Act. It reads: