BHARGAVA, J. - The question referred for the opinion of this court is : "Whether the assessee in each case is entitled to a deduction of the sum of Rs. 6,688 being interest paid during the relevant previous year on money borrowed to buy shares in the Bijli Cotton Mills Ltd., which shares yielded no income, from his other income, profits and gains, in order to arrive at his correct taxable income "
The facts of this case are very brief and simple. Both the assessees were partners in a firm Shiam Lal Chiman Lal. They earned incomes from the firm as also from some property and as interest on deposits made by them as a Hindu undivided family, viz., Shiam Lal Chiman Lal. From the firm each of these assessees borrowed a sum of Rs. 2,50,000 to buy shares in the Bijli Cotton Mills Ltd. The shares of the Bijli Cotton Mills Ltd., were actually purchased by them but during the relevant previous year no dividends were received by them on these shares. They however had to pay a sum of Rs. 6,688 each as interest to the partnership firm Shiam Lal Chiman Lal form which they had borrowed the sum of Rs. 2,50,000 each for the purpose of purchasing those shares. It was claimed by each of the assessees that this sum of Rs. 6,688 paid as interest by each of them was a deductible expenditure under section 1292) of the Income Tax Act when computing the income from dividends on shares of the Bijli Cotton Mills Ltd. and since no actual dividends were received it should be held that each of them suffered a loss to the extent of Rs. 6,688 and that loss should be set off under section 24(I) of the Income Tax Act against their income from the other heads which has been mentioned above. The Income Tax Appellate Tribunal refused to allow this set-off and consequently on the request of the assessees the question mentioned above has been referred for our opinion.
The Point that has been raised in this question came up for consideration before a Bench of the Bombay High Court in ormerods (India) Private Ltd. v. Commissioner of Income Tax. In that case the learned judges of the Bombay High Court fully discussed all the relevant provisions of the Income Tax Act, referred to a decision of the Supreme Court in Eastern Investments Ltd. v. Commissioner of Income Tax, differed from a decision of the Patna High Court in Maharajadhiraj Sir Kameshwar Singh v. Commissioner of Income Tax, and held that, in a case of this nature the loss incurred by the interest on money borrowed for earning income by set off against income from other heads in view of the provisions of section 24(1) of the Income Tax Act. When this case was first argued before us without a reference to the decision of the Bombay High Court, we came to the same view which has been expressed by the Bombay High Court in this case and for the identical reasons given by the learned judges of that court. Subsequently when the decision of the Bombay High Court was cited before us, our view was strengthened by the view of the Bombay High Court. Since the reasons which led us to take the view have already been mentioned in detail in the judgment of the Bombay High Court we do not consider it necessary to express them again in this judgment and we think it is enough for us to say that, with respect, we agree with the reasons as well as the decision of the Bombay High Court in the case cited above.
In view of that decision the question referred to us is answered in the affirmative. The assessee will be entitled to costs of this reference which we fix at Rs. 200.
