Case Law Details
Issue- Whether on the facts and in the circumstances of the case, the High Court was right in law in holding, that, the interest paid for broken period should not be considered as part of the purchase price, but should be allowed as revenue expenditure in the Year of purchase of securities.
Learned ASG appearing for the revenue, relying upon a judgment of this Court in the case of Vijaya Bank Ltd. vs. Additional Commissioner of Income Tax, Bangalore reported in 1991 Supp. (2) SCC 147, wherein this Court in paras 4 & 5 observed as under:
“4. In IRC v. Pilcher (1949) 2 All ER 1097, Lord Justice Jenkins stated : (All ER p.1103)
“It is a well settled principle that outlay on the purchase of an income-bearing asset is in the nature of capital outlay, and no part of the capital so laid out can, for income tax purposes, be set off as expenditure against income accruing from the asset in question.”
5. In the instant case, the assessee purchased securities. It is contended that the price paid for the securities was determined with reference to their actual value as well as the interest which had accrued on them till the date of purchase. But the fact is, whatever was the consideration which prompted the assessee to purchase the securities, the price paid for them was in the nature of a capital outlay, and no part of it can be set off as expenditure against income accruing on those securities. Subsequently when these securities yielded income by way of interest, such income was attracted by Section 18.”
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