BADAL RAM LAXMI NARAIN vs C.I.T. LUCKNOW

The Supreme Court held that under Section 36(1)(iii) of the Income Tax Act, 1922, interest paid on borrowed capital is an allowable deduction if the capital is used for business purposes. The Court found that the Tribunal correctly concluded that the firm took over the debit balance of the HUF in consideration of goodwill, which was not disputed by the High Court. The Court emphasized that the rights of the assessee should be prioritized over the personal liabilities of HUF members, allowing the appeals and affirming the Tribunal's decision.