LexSTATE OF MADRAS versus C. J. COELHO
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
60
SUPREME COURT REPORTS
1964
between partners to arbitrator as provided in the condition
Ja11dtsh Chander of t4eir agreement, cannot be accepted
as souud.
The
v
.
. Y.T d
,reason given by the Divisional Bench that as s. 69 al~ows
.n.a]Orio
ra er' - .
.
. -
d1Ssc:Jl.utJ.on and accounts of
unregistered
partnership
it
Hidayarul/ah J. cannot bar such an application appe<:rs · •, "'; to be not quite
m point.
1964
April, 30.
1n ·our judgment, the words '0th.er proceeding' in sub-
s. (3) must receive their full meaning untramelled by the
words ·a claim of set-off'.
The latter words neither intend
nor can be construed to cut down the generality of the
words 'other proceeding'. The sub-section provides for the
application of the provisions of sub-ss. (1) and (2)
to
claims of set-off and also to other proceedings of any kind
which can properly be said to be for enforcement of any
right arising from contract except those expressly mentioned
as exceptions in sub-s. ( 3) and sub-s. ( 4).
The appeal is, therefore, allowed.
The decision of the
High Court will be set aside and the application under s.
8(2) of the Arbitration Act shall stand dismissed
with
costs throughout on the applicant in the High Court.
Appeal allowed
STATE OF MADRAS
v.
C. J. COELHO
(K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI J.J.)
Incon1e Tax-Interest
paid
on monies borrowed for purchase of
plantation-I/ deductible from the assessable income-Expsnditur•
if laid out or expended wholly and exclusively for the purpose of
plantation-Madras Plantations Agricultural Income .. fax Act
(Mad.
V of 1955), s. S(e) and (k).
·
The respondent, assessee purchased an estate, consi!lling of tea. coffee
and rubber plantation•. Out of the sale price of Rs. 3,10,000/· ho
borrowed Rs. 2,90.000/· at interest. For the assessment year 1955·56.
8 S.C.R.
SUPREME COURT REPORTS
61
he claimed deduction on interest amounting to Rs. 22,628-9-8 under 1•
S(Jtl of the Madras Plantations Agricultural Income-tax Act. The Agrl.
cultural Income Tax Officer allowed only Rs. 1.570-10-7 under the Act.
The <!Ssessee appealed to the Assistant Commissioner 11.nd to the Tribunal,
without success. On his revision application, the High Court held that
the deduction claimed by him fell within the scope of s. 5 ( e) of tho
Act and that the whole of Rs. 22.628-9-8, should have been deducted
from his ~sscssable income. On appeal by special leave, the appellant
contendeCI that the interest paid by the assessee was not deductible under
1. S(e) of the Act on three grounds; first, it was in the nature of capital
exren'diture; secor.dly, it was a personal expense of the asscssee, and
thirdly, it was not laid out or expended wholly and exclusively for the
purpose of the plantation.
liELD:-(i) There is no force in the contention that the payment ot
interest was capital expenditure within s. 5(e) of the Act. In the
instant case. the payment of interest was revenue expenditure. No new
asset was acquired with it; no enduring benefit was obtained. Expendi-
ture incurred was par of circulating or fi~ating capital of the asscssee.
In cr'dinary co1nmercial practice. payment of interest would not be termed
., capital expenditure.
Assam Bengal C~"ment Co. Ltd. v.
CommissloMr of lncome-taz,
[ 1955] l S.C.R. 972. relied on.
S. Kuppuswami v. Commissioner of Income-tax,
Madras,
I.L.R.
{1954] Mad. 977; and Co1nr11issior1er of lncomc·tax, Madras v. Siddareddy
Venkatasuvba Reddy, [1949] 17 I.T.R. 157, held inapplicable.
The l~uropea11 llivest1nent Trust Company Ltd. v. Jackson, 18 T.C. 1
and Greshan Life Assurance Society v. Styles, 3 T.C. 185, distinguished.
(ii) The second contention is equally without' substance.
It Is
impossible to hoJd that any expense to discharge a personal obligation
becomes a personal expense within s. 5(e) of the Act. Personal ex-
penses ,vouid include expenses on the person of the assessee or to satisfy
his personal needs such as clothes. food etc.) or purposes not related to
the business for which the deduction is claimed.
(iii} On the fact-; of the present case it is impossible to dissociate the
character of the assessee as the owner of the plantation and as a person
working the plantation. The assessee had bought the plantation for
working it as a plantation. The payment of interest on the amount
borrowed for the purchase of the plantation. when the whole transaction
of purcha~e ana the working of the plantExcerpt shown. Read the full judgment & AI analysis in Lexace.