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Commissioner Of Income-Tax, Bombay ... vs Jagmohandas J. Kapadia on 15 February, 1966

"12. The borrowings were not made to make investments and earn interest from them. The borrowed amounts kept in short- term deposits undoubtedly yielded interest. The interest income from such deposits was from such deposits only and was incidental to and was the result of the same. The interest income was totally independent of the borrowings. As pointed out by the Bombay High Court in CIT v. Jagmohandas J. Kapadia [1966] 61 ITR 663 at page 669 in interpreting the corresponding section 12(2) of the 1922 Act relied on by the ITO also, the expenditure incurred must be for the purpose of making or earning the income; which is not the position in the present case. In examining the claim, the incongruities and hardship caused, cannot obviously blur our approach. From this it necessarily follows that the conclusions of the ITO concurred with by the Commissioner are unexceptionable.
Bombay High Court Cites 8 - Cited by 17 - Full Document

Eastern Investments Ltd vs Commissioner Of Income-Tax,West ... on 4 May, 1951

If the debentures had been paid for in cash by the same party, no objection could have been taken to allowing the interest amount to be deducted. In principle, there appears to us no difference, if instead of paying in cash the payment of the price is in the share of giving over shares of the company, when the transaction is not challenged on the ground of fraud and is approved by the Court in the reorganisation of the capital of the company. In our opinion, therefore, the ground on which the Income-tax Appellate Tribunal and the High Court disallowed the claim of the assessee is not sound." (p. 7) What was paid by the assessee in that case was interest or an expenditure in respect of its income and it was on that basis, the Supreme Court found that the case attracted section 12(2). But, that is not the position in the present. In my view the true ratio of this case far from supporting the case of the petitioner, supports the case of the revenue.
Supreme Court of India Cites 6 - Cited by 340 - V Bose - Full Document
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