SRINIVASAN J. - For the year ended March 31, 1958, relevant to the assessment year 1958-59, the assessee claimed a deduction from her income of a payment of Rs. 2,965 paid as interest on borrowings for the purpose of investment, audit fees of Rs. 150 and stationery expenses of Rs. 24. These allowances were claimed as against her share of profit resulting from her partnership in the firm of Messrs. Thayub Mohammed Hajee Moosa and Co., Madurai, hereinafter referred to as Thayub, Madurai. The Income-tax Officer refused the claim on the ground that all expenditure had to be claimed in the firms assessment under section 10 of the Act. When the matter went up in appeal to the Appellate Assistant Commissioner, the authority found that the assessee had borrowed a sum of Rs. 90,000 from Messrs. T. S. Hajee Moosa and Company, Madras, with whom she had a running account and that this amount had been invested as capital in Thayub, Madurai. The Madras firm into which all her income, both the share income from the partnership and income from her other properties, was credited, adjusted those credits against the borrower, leaving a debit balance of Rs. 53,182. It was on this debit balance that the assessee had a pay the interest of Rs. 2,965 to the Madras firm. On these facts, the Appellate Assistant Commissioner concluded that the interest paid by the assessee was on amounts specifically borrowed for the purpose of investment in Thayub, Madurai, in which she was partner. He accordingly, allowed the deduction. With regard to the two other items referred to, he was of the opinion that since the assessee had maintained accounts in Gujarathi and all her statements of accounts had been prepared from such books, the audit fees and stationery expenditure could also be allowed.
Against this decision of the Appellate Assistant Commissioner, a further appeal was taken to the Appellate Tribunal. The Tribunal found the following facts : The Madras firm acted as the assessees bankers and agents. As on April 1, 1956, the assessee had an overdraft of Rs. 96,625. During the year 1956-57, the banking firm had collected rents and interest on her behalf and had also made several payments on her account. Into this account the assessee paid a sum of Rs. 1,01,000. This was the capital which the assessee received on her retirement from the firm, Hameedia Stores, in which she was a partner till March 31, 1957. On March 31, 1957, therefore, the overdraft balance had become reduced to Rs. 53,182. It was on this debit balance that interest of Rs. 2,965 was charged by the banking firm against the assessee during the year ending March 31, 1958. From these facts, the Appellate Tribunal took the view that the advance of capital of Rs. 90,000 to Thayub, Madurai, cannot be attributed to any borrowings at all, for in the Tribunals own words : 'To all intents and purposes, it can very well be out of the sum of Rs. 1,01,000, the capital she received back from the Hameedia stores in which she ceased to be a partner on March 31, 1957. On the very same day, she acquired the share in the Madurai firm also. Mr. Padmanabhan relied on some letters from the assessee to the bankers to show her clear intention to invest the sum of Rs. 90,000 only from her borrowing. The overall position set out above is compelling and has to give way to words and phrases. For lack of identity, the assessees contention must fail.' It, accordingly, reversed the decision of the Appellate Assistant Commissioner.
On the application of the assessee, the Tribunal referred the following question for the decision of this court :
'Whether, on the facts and in the circumstances of the case, the assessee was entitled to deduct the interest payment of Rs. 2,965, audit fees of Rs. 150 and stationery expenses of Rs. 24 against the share income of the assessee from the registered firm of Thayub Mohammed Hajee Moosa and Co. ?'
In the statement of the case, a summary of the assessees account with the banking firm has been extracted. It reveals that the sum of Rs. 1,01,000 received from the Hameedia Stores as the return of the share capital was credited therein. Other amounts of income of the assessee were also so credited. During the year, the assessee withdrew amounts from the banking firm, Rs. 5,000 towards investment loan, Rs. 42,000 towards gifts, Rs. 90,000 for investment as share capital in Thayub, Madurai, and Rs. 11,772 towards her expenses. Setting off these withdrawals against the amount to her credit, there was a debit balance of Rs. 53,182. The Appellate Tribunal apparently relied upon the circumstance that the assessee, according to the above account, had certain sums belonging to her which she could very well have utilised towards furnishing the capital to Thayub, Madurai, and that, therefore, she need not have made any borrowing. It seems to us that view is hardly sound. To take a general example, it may be that an assessee has in his banking account a large sum of surplus money available. But that does not prevent the assessee from making a borrowing elsewhere for the purpose of financing a business or a partnership. It is not unusual for persons to make borrowings if they could do so at a lower rate of interest for the purpose of making new investments and not to disturb their existing investment which may be earning a higher rate of interest. The fact, therefore, that the assessee had ample resources which she could draw upon for the purpose of making this investment and that she need not have borrowed is hardly relevant to the question. If the assessee had made the borrowing from another banking firm and not from Messrs. T. S. Hajee Moosa and Co., Madras, with which she had a running account, and had invested the borrowing in the Thayub, Madurai, and had further to pay interest upon the borrowing, the department and the Tribunal could not very well have refused to allow the interest payment as a deduction from her income. That the assessee could very well have followed a different method of making the investment is not a matter that concerns the department. The only question they have to consider is whether the amount of interest paid is in respect of the capital borrowed for the purpose of the business, profession or vocation within the meaning of section 10 (2) (iii) of the Act. There is no dispute that under her directions the sum of Rs. 90,000 was debited against her in the banking firms account and this sum was invested in Thayub, Madurai. It is clear, therefore, that the borrowing was for the purpose of the business and the amount of interest is an allowable item, as was rightly held by the Appellate Assistant Commissioner. The view taken by the Tribunal is thus clear erroneous.
On the question of the audit fees and the stationery expenses, we are, however, unable to see under what head of allowance this can conceivably fall. In so far as the ascertaining of her share income from the firm is concerned, such audit fees and necessary expenses which were incurred in the computation of the firms income must have already been allowed in the assessment of the firm. We do not conceive it to be possible for an assessee to ask for an allowance of certain expenses connected with the audit of her own personal account either for the purpose of her own satisfaction or for the purpose of preparing the necessary account for submission to the income-tax authorities for assessment. These items of expenses were not incurred by her in connection with the business from which income was derived. On the other hand, as we have pointed out, that income was ascertained on the assessment of the firm in respect of which these necessary items of expenditure would normally have been allowed. This claim appears to be more in the nature of a personal expenditure incurred by her in order to enable her to prepared and submit accounts to the Income-tax Officer. No provision of the Act has been indicated to us as permitting such allowance. These items were rightly disallowed.
The question referred to us is accordingly answered in favour of the assessee in so far as the interest payment is concerned. As the assessee has succeeded to a large extent, she will be entitled to costs from the department. Counsels fee Rs. 250.
Question answered accordingly.