- (1.) THE real question that falls to be determined in this case is whether the assessee is entitled to claim a deduction in respect of an amount of Rs. 26,197 being the interest charged by the firm, Kapurchand and Co, of which he was a partner and debited in his account with the firm. We shall presently show how the question actually referred does not reflect the real controversy between the parties.
(2.) THE assessee, Kevalchand Nemchand Mehta, is a partner of the firm of Messrs. Kapurchand and Co. He, in his individual capacity, had a income from house properties, dividends and interest. He also had a personal account with the firm, Kapurchand and Co. , in which his income from the firm used to be credited and his withdrawals for personal and other expenses used to be debited. The Samvat year 2012 of this account commenced with a credit balance of Rs. 2,07,119-6-10. Then he made several withdrawals including payments for his own personal expenses. We are not concerned with these items of personal expenses, but on 16th December, 1955, he withdrew from this account a sum of Rs. 3,75,000. This amount was taken from the firm Kapurchand and Co, and deposited with Messrs. Kapurchand Ltd. ,. forthwith on the same day in the name of his minor son, Narendra, to whom he admittedly gifted the amount.
(3.) AS a result of the withdrawal of this amount and the other transactions entered into in Samvat year 2012, his account with the firm was overdrawn to the extent of Rs. 53,305 at the end of the year. On his borrowings from the firm an amount of 9,004-14-0 was charged to him on account of interest by the firm and this is found debited to his account on 2nd November, 1956, practically at the end of the account year.;