Business interest deduction applies only to borrowings used for the relevant business, not another venture's share capital investment.

Interest on borrowed capital is deductible only when the borrowing is for the purpose of the same business against whose profits the claim is made; borrowings applied to share capital in another venture do not qualify merely because the assessee carries on multiple businesses. The principle of aggregation of income does not enlarge the scope of the specific business deduction. On the separate factual issue, the assessee was entitled to establish that the investment came from his own funds rather than borrowed money, and that unresolved source-of-funds question required fresh examination.

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Issues: Whether interest paid on borrowed money can be deducted under section 10(2)(iii) when the borrowed funds were invested as share capital in another business venture, and whether the factual claim that the investment came from the assessee's own funds instead of borrowed money required fresh examination.

Analysis: Deduction under section 10(2)(iii) is confined to capital borrowed for the purpose of the assessee's business in relation to which the expenditure is claimed. The provision does not allow interest on borrowings used for one business to be deducted against the profits of another business merely because both businesses belong to the same assessee. The principle of aggregation of income for tax computation does not control the allowance of specific business deductions. On the factual question, the Tribunal had not dealt with the assessee's contention that the investment in the firm came from his own capital funds and not from borrowed money. Since that question depends on evidence, there is no presumption either way.

Conclusion: The claim for deduction was rejected insofar as the borrowed money was applied to the share capital investment in the firm, but the assessee was allowed to establish before the Tribunal that the investment came from his own funds, in which event the deduction question would have to be reconsidered.

Final Conclusion: The legal scope of section 10(2)(iii) was confined to borrowings used for the relevant business, and the matter was sent back for fresh decision on the unresolved factual source-of-funds question.

Ratio Decidendi: Interest on borrowed capital is deductible only when the borrowing is for the purpose of the business against whose profits the deduction is claimed; borrowings applied to another business do not qualify merely because the assessee carries on multiple businesses.

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