HAMENDRA SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter to be called as "the Act"), made by the Income-tax Appellate Tribunal, Jaipur, on the request of the assessee to answer the following questions of law, namely :

(2.) WHETHER the learned Tribunal is correct in invoking the provisions of Section 57 of the Act when the assessee's interest-earning fixed deposits stood reduced by the amount of loans taken on the security thereof and the interest on reduced amount only is taxable under Section 56 of the Act?"

(3.) THERE is yet another aspect of the case. In view of the aforesaid facts and circumstances, it cannot be said that interest of Rs. 14,740 was paid wholly and exclusively for the purpose of keeping and maintaining the income by way of interest therefrom. It cannot be denied that the immediate purpose of taking loans and paying interest of Rs. 14,740 was to construct the house. It shows that the purpose was a dual one. If that be so, it cannot be said that the expenditure was incurred wholly and exclusively for the purpose of making the earning in question as required under Clause (iii) of Section 57 of the Act.