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1 - 8 of 8 (0.49 seconds)Commissioner Of Income-Tax, Gujarat vs Mrs. Indumati Ratanlal. on 9 October, 1967
The Gujarat High Court's decision in Commissioner of Income-tax v. Mrs. Indumati Ratanlal was not concerned with the case of a trustee but dealt with the case of legal representatives.
Bai Bhuriben Lallubhai vs Commissioner Of Income-Tax, Bombay ... on 21 April, 1955
12. Mr. Joshi, for the revenue, contended that the immediate purpose for borrowings in the instant case should be regarded as discharging personal liability which the trustees were under an obligation to do and the ultimate motive on the part of the trustees may be to preserve or maintain the trust property so as to maintain the same old income that was being received. It is not possible to accept this submission of Mr. Joshi. It is undoubtedly true that since the trustees held the trust property as legal owners they would as such legal owners be under a liability to meet the proportionate estate duty but all the same that liability which the trustees were required to meet in the discharge and management of the trust which they had undertaken under the deed of indenture dated 6th October, 1955. Moreover, the estate duty liability was the first charge on the movable property held by them as trustees. Further, though in a sense it is the personal liability of the trustees, ultimately the trustees are entitled to reimburse themselves out of the trust funds. The test for allowing a deduction under section 12 (2) of the Act would not be whether the liability that was to be discharged was personal liability or not but whether the expenditure in the shape of interest that was incurred had any direct or indirect connection with the earning of the income, which expression would include maintaining the income or preservin the income at the old rate. Since on the facts in this case it is clear that the borrowings were made by the trustees avowedly for the purpose of meeting the estate duty liability which attached to the property which was the subject-matter of the trust and that too for the purpose of maintaining or preserving the erstwhile income that was being received from the corpus of the said trust, in our view, the nexus between the expenditure incurred and the earning of the income could be said to be easily established. Therefore, in our view, the expenditure in the instant case will be a permissible deduction under section 12 (2) of the Act since the test indicated in Bai Bhuriben Lallubhai v. Commissioner of Income-tax has been satisfied.
Income Tax Rules, 1962
Section 74 in Estate Duty act, 1953 [Entire Act]
Estate Duty act, 1953
Section 12 in Income Tax Rules, 1962 [Entire Act]
Nirmala M. Doshi vs Commissioner Of Income-Tax, Bombay ... on 31 March, 1970
In this context it would be useful to refer to another decision of this court in the case of Smt. Nirmala M. Doshi v. Commissioner of Income-tax, where the assessee was required to pay interest on call monies in respect of the shares which had been allotted to her after she had received notice as to why the shares should not be forfeited and this court took the view that the payment of interest amounting to Rs. 9,020 was not capital expenditure but a payment made for the purpose of earning dividend income. On behalf of the assessee a submission was made that if default had been made in the payment of interest as fixed by the notice served upon the assessee by the company, the company was entitled to proceed to forfeit all the 2,700 shares, and that the asset of the shares and investment in these shares which was the source for dividend income would have altogether become destroyed if the assessee had failed to pay the interest of Rs. 9,020 and, therefore, the interest paid should be allowed as a deduction under section 12 (2) of the Act. This contention was accepted by the court and the court took the view that the aforesaid facts clearly establish the position that the sum of Rs. 9,020 was paid "solely for earning dividend income". Relying upon this decision Mr. Palkhivala contended before us that if the payment of interest made for the purpose of avoiding forfeiture of shares that had been allotted to the assessee was regarded as permissible deduction under section 12 (2) of the Act, then in the instant case the payment of interest for the purpose of preserving the assets and avoiding the dissipation thereof should be regarded as permissible deduction under section 12 (2) of the Act. In our view, the contention is well-founded and will have to be accepted.
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