Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | s. 12(2) Indian Income-tax Act (XI ·of 1922) |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Act(s) Referred | Indian Income-tax Act, 1922 (11 of 1922) |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Allowed |
Headnote | Indian Income-tax Act (XI ·of 1922), s. 12(2)-Business expenditure-Interest on debentures-Reducing capital of company by taking over shares and giving debentures to shareholder-Income of company reduced-interest on debentures whether allowable.A private limited company formed for dealing in shares and securities had a share capital of 250 lacs of rupees of which shares of the face value of 50 lacs were held by A and the remaining shares were held by his nominee's. As the company was in need of money it was resolved, with the consent of A, to reduce the share capital by 50 lacs by the· company taking over the 50 lacs shares which were held by A and giving to A instead debentures of the face value of Rs. 50 lacs carrying interest at 5 per. cent. per annum. The Income-tax Appellate Tribunal and the High Court held that the interest on the debentures could not be allowed as business expenditure under s. 12(2) of the Income-tax Act, the main grounds on which this conclusion was arrived at. being (i) the purpose of the transaction was to effect. the conversion, (ii) the taxable income of the company was reduced, (iii) it was the same person who brought about the transaction, to whom .the share money was paid and who took the debentures, (iv) · the transaction was more in the interest of that person than the company, ( v) the capital of the company could have been reduced in other ways : |
Judge | Hon'ble Mr. Justice Vivian Bose |
Neutral Citation | 1951 INSC 30 |
Petitioner | Eastern Investments Ltd. |
Respondent | Commissioner Of Income-Tax West Bengal |
SCR | [1951] 1 S.C.R. 594 |
Judgement Date | 1951-05-04 |
Case Number | 89 |
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