M M THAPAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference arises out of the income-tax assessment of M. M. Thapar of Calcutta, the assessee, in the assessment years 1965-66 to 1969-70, the previous years being the financial years from 1964-65 onwards. The facts found and/or admitted are, inter alia, that the assessee had during the said assessment years earned taxable income, but, for payment of tax, he borrowed money. In the assessments, he claimed deductions of the interest paid on such borrowings.

(2.) The Income-tax Officer rejected the assessee's claim. On further appeal, the Appellate Assistant Commissioner took the view that the purpose of the borrowing, on which interest was paid, was payment of taxes and not investment and, therefore, the assessee was not entitled to any deduction., It was also urged before the Appellate Assistant Commissioner that a part of such interest paid was attributable to loans raised for payment of annuity deposit by the assessee and such interest should be allowed as an expenditure under Section 57 of the Income-tax Act, 1961. The Appellate Assistant Commissioner held that an annuity deposit did not possess the characteristics of income assessable under the head " Other sources" and, therefore, no deduction was permissible on account of interest paid on money borrowed for the purpose of making such deposits.

(3.) Being aggrieved, the assessee preferred a further appeal before the Income-tax Appellate Tribunal. The Tribunal, following a decision of this court in the case of Mannalal Ratanlal v. Commissioner of Income-tax [1965] 58 ITR 84(Cal), held that the assessee was not entitled to any deduction in respect of interest paid on money borrowed for payment of tax. As to the claim for deduction of interest on borrowings to pay annuity deposit the Tribunal did not accept the same as an allowable deduction under Section 12(2) of the Indian Income-tax Act, 1922, holding that the interest paid had no connection with the interest earned from annuity deposits. The appeals of the assessee were dismissed.