COMMISSIONER OF INCOME TAX Vs. SHANTI DEVI JALAN

JUDGEMENT

(1.) This arises out of a reference made by the Tribunal under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as " the Act "). The admitted and/or undisputed facts are as follows :

(2.) The assessment year is 1965-66. The assessee claimed a deduction of interest amounting to Rs. 22,533 paid to the firm of M/s. Soorajmall Nagar-mull (hereinafter referred to as the firm). The assessee was a partner of the said firm. In the assessee's personal account in the books of M/s. Soorajmull Nagarmull there was a debit balance. This debit balance was on account of drawings for personal expenses of the assessee and also due to the losses incurred by the firm and the apportionment of such losses to the account of the assessee. Interest was charged by the firm on this debit balance which came to Rs. 22,533. The assessee claimed deduction in respect of this interest charged. The ITO disallowed the claim. It was stated that in the last assessment that such debit balance comprising of business losses and personal drawings represented the personal liabilities, and the interest payable on such personal liabilities was not allowable against the income earned under any of the taxable heads. The ITO did not find any reason to deviate from the findings of the last year.

(3.) Being aggrieved by the same, the assessee preferred an appeal before the AAC. The AAC rejected the claim of the appellant. It was stated that the interest had been paid on a debit balance which consisted mainly of the drawings for personal purposes.