COMMISSIONER OF INCOME TAX Vs. FIDA HUSSAIN G ABBASI

JUDGEMENT

(1.) ON an application made by the CIT, the Tribunal, Bombay, has referred, under S. 66(1) of the Indian IT Act, 1922, the following questions of law for the opinion of this Court :

(2.) THE material facts as appearing from the statement of the case are these. The assessee is a shareholder and director of Ratlam Straw Board Mills (Private) Limited, Ratlam. He holds 225 shares of Rs. 1,000 each. He had borrowed Rs. 20,000 from Abdul Hussain Ismailji in December, 1953, and deposited that amount with the company in two instalments on 19th Jan., 1954, and 1st Feb., 1954. He had borrowed another sum of Rs. 15,000 from Asghar Ali Kamruddin on 17th July, 1954, and deposited the amount with the company on the same day. These amounts in deposit were adjusted against the shares which were allotted to the assessee, who paid in the relevant account year (1955 -56) Rs. 2,850 as interest as follows:

(3.) IN our opinion, all that S. 12(2) requires is that the expenditure should be incurred solely for the purpose of earning income or making profits or gains, that it is not required that it should be fruitful and that interest found to have been paid on money borrowed for investing in shares in a company is a legitimate deduction under S. 12(2) of the Act. In the instant case, there is income from which the expenditure is deductible.