1965 (3) TMI 26

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....h carried on business among others in oil mills, sugar mills and ginning factories. The respondent formed an association with another Hindu undivided family Ganga Prasad Bachhulal---to carry on a business styled "Govindram Sugar Mills". In assessing the income of Govindram Sugar Mills for the account period ending March 31, 1950, the Income-tax Officer, Ratlam, allowed as a permissible deduction a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....The assessee's total profit from the mills. . .. arises on account of the carrying on of the mills. Allowance of interest is only an appropriation of the same profits in order to adjust the rights of the various members inter se. Therefore ... it is not correct for the department to include as an item of income and disallow the loss on the ground that it is a loss of an association of persons. If ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t be regarded as a mere book entry and " having regard to the substance of the matter, there was no real income in the shape of interest on the capital invested in the business ". Against this order passed by the High Court, with certificate of fitness granted by the High Court, this appeal has been preferred. In our view, the High Court was right in holding that there was no real income receive....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....oss suffered by the sugar mills : they represented no real income to the two members. The Tribunal and the High Court were, therefore, right in regarding the entry as a mere book entry not representing true income. Counsel for the Commissioner urged that as the amount of interest was allowed as a permissible outgoing in the assessment of the association, a corresponding amount should be regard....