HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Bombay Steam Navigation Co. (1953) Private Ltd. v. Commissioner of Income Tax, Bombay
Civil Appeals Nos. 1023 and 1024 of 1963
[1965] 1 SCR 770 ·
Indian Income Tax Act, 1922: sections 10(1), 10(2)(iii) and 10(2)(xv)
Sources & disclosures includedDownload original judgment / order
3-judge bench · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1955-56, 1956-57
01 · Facts of the case
The assessee was incorporated to take over Konkan passenger and ferry services. It acquired steamers and other business assets from Scindia Steam Navigation, partly against shares and partly against an unpaid balance carrying six per cent interest and secured by hypothecation. The tax authorities and Bombay High Court disallowed interest of Rs. 2,74,610 and Rs. 2,86,823 for the two assessment years.
02 · Discussion by the Hon’ble Court
Shah and Sikri JJ. held that a contractual debt for unpaid purchase consideration did not become a loan merely because it carried interest and security; every loan creates a debt, but every debt is not a loan. The expenditure nevertheless had an immediate and integral connection with commencing and carrying on the acquired business. Interest paid while the business operated was revenue expenditure laid out wholly and exclusively for that business. Subba Rao J. agreed with the result while reserving his view on section 10(2)(iii).
03 · Judicial decision
The Court allowed both appeals with costs and held the interest deductible under section 10(2)(xv). It did not find it necessary to decide the alternative section 10(1) basis.
Source: Holding and operative order
04 · Outcome / in whose favour
In favour of the assessee. The deduction succeeded as business expenditure, not as interest on capital actually borrowed.
Source: Operative result
05 · AKHB REVIEW POINT
AKHB analysis: characterise the underlying funding obligation before selecting the deduction provision. For deferred purchase consideration, document the acquisition agreement, commencement of business, purpose and period of interest, and separately test whether tax law requires capitalisation or permits a revenue deduction.
Source & verification
Download original judgment / order · Open cited source rendition
Full 10-page SCR report read and checked. The editorial headnote was distinguished from the judgment text and operative order.
- Exact source bytes, SHA-256 and 10-page count match catalogue asset 1965_1_770_779; the full extracted report and operative pages were reviewed.
- The source verifies Civil Appeals Nos. 1023 and 1024 of 1963, the stated bench, issues, reasoning and operative result.
- No published AKHB note or archived reviewed record with this source hash, case identity and operative decision was found.
Statutory scope
The ruling concerns section 10 of the 1922 Act and distinguishes a debt from borrowed capital. Current deductibility requires independent application of the Income-tax Act, 1961 and any capitalisation rules.
Later treatment
Source checked 2026-10-10. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Coverage, AI disclosure & professional disclaimer
Selected Supreme Court income-tax decisions and procedural orders checked against their identified sources. This collection is not exhaustive. The research catalogue has 2,569 indexed PDF assets, including alternate copies and incidental matches; that is not a count of unique or reviewed judgments. Historical and unreported coverage remains open.
AI-assisted research checked against the identified source. Extraction, interpretation or omission errors remain possible. Source review does not mean independent approval by a practising professional. Verify every material statement against the complete original judgment.
General research information only; not legal or tax advice, a certified judgment or a substitute for the full order. Applicability depends on facts, assessment year, statutory version and jurisdiction. Subsequent treatment is unverified unless a note expressly identifies the sources checked. Downloading does not create a professional engagement. Obtain case-specific advice before reliance.
The official 1961–2025 structural correspondence does not establish that a precedent applies under the new Act. Verify the enacted wording, commencement and transitional provisions separately.