VIKRAM SOMANY Vs. C.I.T.-VIII

JUDGEMENT

(1.) The Court: It is an admitted position that with borrowed funds, the appellant acquired control of the two companies. The interest paid on the borrowed funds was claimed as an allowable expenditure by the assessee under Sec. 36(1)(iii) read with Sec. 57 of the Income Tax Act, 1961. Ms. Banerjee led by Ms. Agarwal, learned counsel, for the appellant also invoked Sec. 37 of the said Act. This Sec. is as follows:

(2.) Advancing her arguments simply they argued that this expenditure of payment of interest was incurred by the assessee for the purpose of augmenting its business and was allowable by reason of the ratio laid down by a division bench of this Court in Commissioner of Income Tax Vs. Rajeeva Lochan Kanoria reported in [1994] 208 ITR 616(Cal).

(3.) Sec. 37 covers expenditure of a general nature which are not classifiable under Sections 30 to 36. But, they ought not to be capital expenditure or personal expenses of the assessee. That expenditure which is wholly and exclusively laid out for the purpose of business or profession shall be allowed in computing the income chargeable.