Case Law Details
Mathew Joseph Vs. ACIT (Kerala High Court)
Issue- Whether the income obtained to the assessee by way of interest, by virtue of the amount advanced to a sister concern (admittedly an income from other sources coming within the purview of Section 56 of the Income tax Act) is liable to be set off against the interest paid by the assessee to his bankers in respect of a loan obtained for the export business (packing credit facility) as an eligible deduction under Section 57 (iii) of the said Act is the point to be considered and answered by this Court.
It can be seen that the appellant assessee admittedly had taken a loan from the Bankers for promotion of their export business, for which interest was payable and it was being paid accordingly. The fact that a portion of the said loan was diverted to a sister concern, who was doing some other business, earning income by way of interest (though at the same rate) was not a matter having exclusive nexus with the income and expenditure as aforesaid. This Court does not propose to go into the question whether the amount obtained by way of loan from the Bank could have been ‘legally diverted’ to some other establishment of choice of the assessee without the concurrence of the Bank. However, the fact remains that no such consent or concurrence was obtained and no document was produced to hold that it was a transaction permitted by the Bankers of the assessee.
Held- law declared by the Apex Court in Gopinathan’s case was correctly applied by the assessing authority/ appellate authority/ Tribunal to the case in hand and no distinction has been made out by the appellant assessee to take a different view. We answer the substantial question as to the scope and applicability of Section 57(iii) in the instant case against the appellant assessee and in favour of the Revenue.
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