HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
India Cements Ltd., Madras v. Commissioner of Income-tax, Madras
Civil Appeal No. 1106 of 1964
[1966] 2 SCR 944 ·
Indian Income-tax Act, 1922: sections 10(2)(iii), 10(2)(xv) and 66
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by S. M. Sikri, J. · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1950-51
01 · Facts of the case
India Cements borrowed Rs.40 lakh from IFCI against fixed assets and incurred Rs.84,633 in stamp, registration, drafting and legal charges. Tax authorities treated the amount as capital; the Tribunal allowed it and the High Court disallowed it (SCR pp.945-948; PDF pp.2-5).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
A loan is a repayable liability, not an enduring asset. Reasonable expenditure to obtain the use of money is commercially analogous to interest and does not become capital because borrowing increases funds, is secured or finances fixed assets. Debt-raising was distinguished from share-capital raising (SCR pp.949-958; PDF pp.6-15).
Source: Primary judgment: discussion
03 · Judicial decision
The appeal was allowed, the High Court judgment set aside, the question answered for the assessee and costs awarded in both courts (SCR p.958; PDF p.15).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of India Cements on final merits (SCR p.958; PDF p.15).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: distinguish debt-raising costs from equity-issue and direct asset-acquisition costs. Preserve loan documentation and transaction-level evidence; the stated use of borrowed funds did not control the historical result (based on SCR pp.950-958; PDF pp.7-15).
Source: Primary judgment: review point
Source & verification
Download original judgment / order · Open cited source rendition
Full 15-page SCR source asset read in page-preserving text and visually inspected; adjacent-report boundaries were checked.
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Statutory scope
The 1922 Act holding is not automatic clearance under present deduction, amortisation, capitalisation or financial-instrument provisions.
Later treatment
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