COMMISSIONER OF INCOME TAX Vs. SORABJI FRAMJI KERAWALA

JUDGEMENT

(1.) THIS reference under Section 66(1) of the Indian Income-tax Act relates to the assessment to income-tax of one Sorabji Framji Kerawala as an individual. The question referred to for the decision of this Court by the Income-tax appellate tribunal is as follows :

(2.) THE assessee is a partner in two unregistered firms known as the Nimar Cotton Press Factory and the Nimar Gin Factory, Khandwa. During the material assessment year be borrowed money from three persons and paid interest to them on his borrowings for the purposes of the firms amounting to Rs. 5,086/11/-. In his individual assessment the assessee claimed to deduct this amount of interest from his assessable income. THE Income-tax Officer negatived the claim holding that these payments of interest were made by the assessee not for the purpose of his business but that they were made in connection with the loan amounts taken for the two unregistered firms as partner and that these payments were attributable properly to the business of the firm and not of the assessee.

(3.) THE decision in (S) AIR 1955 Bom 234 (supra) on which the Appellate Tribunal relied is not relevant here. That was a case where the assesses who way a partner in a registered firm claimed that he was entitled to deduct a certain amount paid by him as interest on moneys borrowed against the profits shown by him in respect of his share in the registered firm and the question that was considered by the Bombay High Court was whether it was open to a partner in a registered firm to claim any deduction whatsoever against the amount of profit determined by the income-tax authorities as the profits of the firm.