1984 (6) TMI 40

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....livered by JAGANNATHA SHETTY J.-This is a reference under s. 256(1) of the I.T. Act, 1961. The question referred runs as follows : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the sum of Rs. 3,450 be allowed as a deduction under section 57(iii) of the I.T. Act, 1961 ? " The facts are : The assessee deriv....

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..... Act from the income from other sources. The ITO did not allow that deduction on the ground that the refund of interest to the bank by the assessee was only an application of the income earned during the assessment year. Upon appeal, the AAC accepted the contention of the assessee and allowed the deduction claimed. He held that the assessee had to prematurely terminate the fixed deposit with t....

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....t there was a clear nexus between the withdrawal of fixed deposit and the purchase of shares. The assessee could invest in shares only after withdrawing the fixed deposit. While so withdrawing, he had to part with the amount of Rs. 3,450 to the bank. It was virtually a borrowal of money on payment of interest ...... So held the Appellate Tribunal. The question now is, whether the interest repai....

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....of the fixed deposit. The action of the assessee is similar to the act of borrowing of money for the purpose of investment in shares. The assessee, instead of borrowing money for the purpose of investment in shares, has availed of his fixed deposit by premature termination. By reason of the premature termination, he had to return Rs. 3,450 to the bank. This liability has got a direct nexus to the ....