COMMISSIONER OF INCOME TAX Vs. KRISHNADAS GOVINDAS

JUDGEMENT

(1.) At the instance of the revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench 'B', has referred the following question of law arising from its order for the opinion of this Court:- "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to deduction of interest money paid to the two firms in question by way of business expenditure?"

(2.) The relevant facts pertaining to the case are as under:-

(3.) As the assessee was indebted to the said firms and his account was debited in the above named two firms, the assessee had to pay interest to the said firms. The assessee was also doing business of money lending and he had also received income from the business of money lending during the assessment years 1966-67 to 1971-72, which are the relevant assessment years. The assessee claimed deduction by way of business expenditure of the amount of interest which the assessee had paid to the above named two firms from the interest income which he had received from his business of money lending. The deduction claimed by the assessee was Rs. 28,334.00 for the A.Y. 1966-67 out of his total business income received for the said assessment year, which was Rs. 42,186.00. For different assessment years income earned by the assessee from his money lending business and the amount of interest paid by the assessee to the above named two firms were different. It was the claim of the assessee that the amount of interest paid by him to the said two firms should be treated as his business expenditure because, had the assessee not permitted the said two firms to debit his account, he would have been constrained to pay the amount payable by him to the said firms from his funds invested in his business of money lending and in that event his business income would have been reduced and therefore the interest paid by him to the said firms was his business expenditure.