Interest deductions disallowed where purchase price included accrued interest; subsequent interest falls within section 18 and not deductible

SC held that deductions claimed for interest on securities purchased from another banking company and in the open market were not allowable. The court found the purchase price reflected accrued interest, and subsequent interest received on those securities fell within section 18. Amounts asserted as deductible were not demonstrated to have been expended for the purpose of realising that interest, and therefore could not be claimed as deductible expenditure.

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The Supreme Court dismissed the appeal regarding the deduction of interest on securities purchased by a banking company, holding that the interest income was taxable under section 18 of the Income-tax Act. The Court ruled that the amounts expended for purchasing the securities were capital outlay and not allowable as deductible expenditure against the interest income. The appeal was dismissed with costs.

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