SHANTIKUMAR NAROTTAM MORARJI Vs. COMMISSIONER OF INCOME TAX BOMBAY CITY
LAWS(BOM)-1954-9-2
HIGH COURT OF BOMBAY
Decided on September 23,1954

SHANTIKUMAR NAROTTAM MORARJI Appellant
VERSUS
COMMISSIONER OF INCOME-TAX, BOMBAY CITY Respondents


Referred Judgements :-

INCOME TAX COMMR.,C.P. & BERAR V. S.M. CHITNAVIS [REFERRED TO]



Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. SORABJI FRAMJI KERAWALA [LAWS(MPH)-1960-1-25] [REFERRED TO]
P M MUTHURAMAN CHETTIAR VS. COMMISSIONER OF INCOME-TAX MADRAS [LAWS(MAD)-1956-10-13] [REFERRED TO]
SUNDARESWARAN N VS. COMMISSIONER OF INCOME TAX [LAWS(KER)-1968-9-13] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RABINDRANATH BHOL [LAWS(ORI)-1994-11-39] [REFERRED TO]
MOTILAL MANEKCHAND VS. COMMISSIONER OF INCOME TAX BOMBAY [LAWS(BOM)-1957-2-14] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. JABARMAL DUGAR [LAWS(RAJ)-1971-7-3] [REFERRED TO]
S S SUBBIER VS. COMMISSIONER OF EXCESS PROFITS TAX [LAWS(MAD)-1958-9-11] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. JAGANNATHAN K M [LAWS(MAD)-1989-2-7] [REFERRED TO]
PHIROZE H KUDIANAVALA VS. COMMISSIONER OF INCOME TAX [LAWS(BOM)-1977-11-50] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GODAVARI SUGAR MILLS LIMITED [LAWS(BOM)-1994-3-75] [REFERRED TO]
LAKSHMI NARAYAN GOURI SHANKAR VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1974-8-5] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. NEW DIGVIJAYSINGHJI TIN FACTORY [LAWS(BOM)-1958-10-34] [REFERRED TO]


JUDGEMENT

Chagla, C.J. - (1.)The assessee is a partner in the firm of Messrs. Narottam Morarji & Co. The firm is a registered firm and his share of the profits in this firm for the assessment year 1942-43, which corresponds with the year of account. Samvat Year 1997, amounted to Rs. 2,28,706. This share was shown by the assessee in his return of total income. The assessee claimed that he had paid a certain amount as interest on moneys borrowed and he claimed that amount of interest as a permissible deduction against the profits shown by him in respect of his share in the firm of Messrs. Narottam Morarji & Co., and the question that arises is, first, whether it is open to a partner in a registered firm to claim any deduction whatsoever against the amount of profit determined by the Income-tax Authorities as the profits of the firm, and the other question that arises is whether, if it is so permissible to the assessee to claim those deductions, whether the deductions claimed in this case are permissible deductions.
(2.)Now, in the year of account Samvat Year 1997 the assessee paid interest amounting to Rs. 31,382. The loans on which this interest was paid amounted to Rs, 6,19,478. The Income-tax Officer allowed interest at 6 per cent, on Rs. 2,77,000. This interest came to Rs. 16,620. The balance of the claim with regard to interest which came to Rs. 14,762 was disallowed by the Income-tax Officer. It is in respect of this amount that this reference has been made.
(3.)Now, this interest was paid on loans which may be divided into two categories. One was loans aggregating to Rs. 1,54,097 and the other loans aggregating to Rs. 1,88,361. With regard to the first category, these were loans taken by the assessee from his relations and the important fact with regard to these loans was that he had pledged his interest in the managing agency commission with his relations to secure these loans. With regard to the other category, those loans were taken by the assessee for the purpose of paying off some of the creditors of his father Narottam Morarji. Now, the reason for paying off the creditors of Narottam Morarji was that before the death of Narottam Morarji in 1929 the firm of Messrs. Narottam Morarji & Co. consisted of the assesseo and his father Narottam. It appears that when Narottam died in 1929 he left a large number of debts and as the creditors of Narottam Morarji threatened to attach the share of Narottam Morarji in their Sciudia managing agency commission, according to the assessee he paid off these creditors by raising loans and these loans amounted to Rs. 1,88,381.


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.