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Baldev Ramnarayan Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberIncome-tax Reference Case No.62 of 1980
Judge
Reported in[1988]174ITR680(KAR); [1988]174ITR680(Karn)
ActsIncome Tax Act, 1961 - Sections 37
AppellantBaldev Ramnarayan
RespondentCommissioner of Income-tax
Appellant AdvocateK.R. Prasad, Adv.
Respondent AdvocateK. Srinivasan and ;H. Raghavendra Rao, Advs.
Excerpt:
.....given for effecting the change. - we, therefore, find no merit in the assessee's contention and the claim for deduction of the interest was rightly rejected by the income-tax officer as well as by the tribunal......assessee's contention that he was compelled to withdraw from the said firm in order to save his investments in the other firms is to be rejected. it is not the case of the assessee, as observed by the tribunal, that if the amounts had been withdrawn by the assessee from his credit balances in the other firms, those firms would have collapsed. we, therefore, find no merit in the assessee's contention and the claim for deduction of the interest was rightly rejected by the income-tax officer as well as by the tribunal. 6. in the result, we answer the question referred in the affirmative and against the assessee.
Judgment:

S.R. Rajasekhara Murthy, J.

1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question of law under section 256(1) of the Income-tax Act, 1961, for the opinion of this court :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disallowing the claim of interest amounting to Rs. 10,932 paid to the firm, Ramnarayan Girdhardas and Co., Bangalore ?'

2. The assessee is a partner in several firms and his main income is in the form of profits from the firms in which he is a partner. For the assessment year 1974-75, he claimed deduction of a sum of Rs. 10,932 being interest paid to Ramnarayan Girdhardas and Co., Bangalore, a firm, in which the assessee is a partner. The interest was paid on the debit balance arising out of the withdrawals from the said firm. The Income-tax Officer disallowed the said claim on the ground that it was not incurred for the purpose of business and the withdrawals were only for meeting the personal expenses of the assessee, i.e., for payment of income-tax, insurance premium, etc.

3. Upon appeal, the Appellate Assistant Commissioner upheld that view and so also the Tribunal, on further appeal.

4. The Tribunal held that the withdrawals by the assessee were for personal expenses and the claim for allowance in respect of the said expenses was, therefore, rightly disallowed by the Income-tax Officer. The Tribunal observed that the borrowing of the money by the assessee was not for the purpose of his business and it could not be considered as an expenditure laid out wholly and exclusively for the purpose of the business as required under section 37 of the Income-tax Act.

5. We agree with the view taken by the Tribunal. It is not disputed that the withdrawals for the personal expenses of the assessee had no nexus at all with the business of the assessee. The assessee's contention that he was compelled to withdraw from the said firm in order to save his investments in the other firms is to be rejected. It is not the case of the assessee, as observed by the Tribunal, that if the amounts had been withdrawn by the assessee from his credit balances in the other firms, those firms would have collapsed. We, therefore, find no merit in the assessee's contention and the claim for deduction of the interest was rightly rejected by the Income-tax Officer as well as by the Tribunal.

6. In the result, we answer the question referred in the affirmative and against the assessee.


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