1. The assessees here are a Nattukottai Chetti firm who trade under the vilasam of A.L.A.R. and their primary business is'the usual Nattukottai Chetti business of banking and money-lending. They also trade in other ways and under the style of Ramaswami & Co., did a considerable piece-goods business in Madras which was opened in 1910. A.L.A.R'! traded almost entirely on borrowed capital. The question is whether they are entitled to deduct from their income-tax assessment interest paid on that part of the borrowed capital which they had put into Ramaswami & Co. That branch of their business was unsuccessful. It had to be closed in 1924 and it was found to have sustained a loss of Rs. 11,00,000 odd. Substantially, two points were put forward against the claim of the assessees to make the present deduction. It was said first that the business of Ramaswami & Co. was quite separate and distinct from that of A.L.A.R. and that interest paid on money devoted to the purpose of providing trading capital for Ramaswami & Co. was not a deduction that could be allowed in the assessment of A.L.A.R. For this, on the findings, we can see no warrant.
2. There is nothing in the name ; Bamaswami & Co. in effect was A. L. A. R. and the case does not seem to us to be different from that of two departments of one big store. Spencer & Co., Ltd., to take a familiar instance, carry on the business of Chemists and Druggists at one end of their buildings and that of haberdashers at the other end, and for all I know they may for their own purpose keep the accounts of these two branches of their activities separate. It is obviously important for a modern multiple store like Whiteleys or Herrods or Spencers here to know how each branch of their business is doing, whether it is making a profit or a loss, so that, if one particular activity is shown to be carried on at a loss, it would be open to them to close down that branch of their general business. Nor does it seem to matter that the piece-goods business conducted under the name of Ramaswami & Co. was carried on in a separate building in another part of Madras. In our opinion the findings preclude any inference that these were two separate and distinct businesses.
3. The second point taken was that, as the piece-goods business had been shut down in the year 1924, and did not function in the year of assessment, 1924-25, it cannot be said that the capital which had been borrowed was employed in the business during the year of assessment. The money was borrowed for the purposes of business and was employed in the business for its purposes until it was lost. Nevertheless interest had to be paid on it and the test seems to us to be not whether it continued to be available for the purposes of the business during the year of assessment, but whether it was in its origin money borrowed as capital for the assessees' business and whether interest was in fact paid on that borrowed capital (existing or lost) during the year of assessment. We, therefore, answer the question propounded in the affirmative, safeguarding ourselves by saying that the word 'separate' in the question framed is perhaps an unfortunate ambiguity, and on the facts of this case means no more than that the business was carried on by A. L. A. R. in separate departments of which the unfortunate piece-goods de' partment conducted under the style of Ramaswami & Co. was one. Costs fixed at Rs. 250 will be paid to the assessees by the Commissioner of Income-tax.