https://www.taxtmi.com/caselaws?id=49735 Interest paid on debentures issued in a capital reduction transaction was held to be deductible only if the expenditure was incurred solely for the purpose of making or earning assessable income under Section 12(2) of the Income-tax Act, 1922. The Court applied the test that the outlay need not be capital in nature, but must be directed solely to earning income. It held that the commercial character of the arrangement, the absence of fraud, and the identity between the debenture holder and the share seller did not alter the nature of the borrowing. Interest on money borrowed for investment purposes remained allowable, and the deduction was permitted. en-us Fri, 04 May 1951 00:00:00 +0530 Mon, 03 Nov 2025 11:06:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=49735 Interest paid on debentures issued in a capital reduction transaction was held to be deductible only if the expenditure was incurred solely for the purpose of making or earning assessable income under Section 12(2) of the Income-tax Act, 1922. The Court applied the test that the outlay need not be capital in nature, but must be directed solely to earning income. It held that the commercial character of the arrangement, the absence of fraud, and the identity between the debenture holder and the share seller did not alter the nature of the borrowing. Interest on money borrowed for investment purposes remained allowable, and the deduction was permitted. Case-Laws Income Tax Fri, 04 May 1951 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=49735