L.K. Trust vs Commissioner Of Income Tax

The Supreme Court considered whether the appellant assessee was entitled to a deduction under Section 36(1)(iii) of the Income Tax Act, 1961 for interest paid on a loan taken to purchase shares. The assessee had borrowed Rs. 3.8 crore from Corporation Bank to acquire shares of Shaw Wallace and Company Limited. The key issue was whether the interest on such a loan qualifies as a deductible business expenditure. The Court analyzed the nature of the loan and the purpose for which it was taken, ultimately determining the deductibility of the interest under the relevant tax provisions.