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TMI Blog2009 (1) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... . K. B. Bhujle with B. V. Bhujle for the respondent. JUDGMENT F. I. REBELO J. - The assessee acquired shares in the financial year 1993-94. They were shown as investment in the balance-sheet as on March 31, 1994. In the subsequent balance-sheets as on March 31, 1995 and March 31, 1996, they were shown as stock-in-trade. 2. The objects clause of the memorandum and articles of association of the assessee show their main object as under: "To purchase, acquire, hold, sell, invest, dispose and otherwise deal in shares, stocks, debentures, stock, Government securities, bonds, units of any company or other authority supreme municipality or local." 3. The assessee held the funds which were utilized for acquiring shares b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in respect of interest liability either under section 36(1)(iii) or under section 57(iii) of the Income-tax Act. Reliance was placed on the judgment of this court in the case of CIT v. Lokhandwala Construction Inds. Ltd. [2003] 260 ITR 579 for the proposition that when the assessee claims deduction of interest paid on capital borrowed, all that the assessee has to show is that the capital which was borrowed was used for the business purpose in the relevant year of account and it does not matter whether the capital was borrowed or not to acquire revenue asset or capital asset. The learned Tribunal also relied on the judgment of the Calcutta High Court in the case of CIT v. Rajeeva Lochan Kanoria [1994] 208 ITR 616 where the Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Similarly another ground raised and considered was whether the Commissioner of Income-tax (Appeals) erred in not accepting the appellant's claim of loss on account of valuation of the stock of shares of M/s. Pandey Shares and Securities. Dealing with these grounds the Tribunal noted that the shares in 1993-94 were acquired and shown as investment in the balance-sheet as on March 31, 1994. However, in the subsequent balance-sheets on March 31, 1995 and March 31, 1996, the shares were shown as stock-in-trade. It was also contended that the shares had been sold during the subsequent assessment years. The Tribunal was of the opinion that the Revenue authority has not properly examined the issues and accordingly restored the same to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anoria [1994] 208 ITR 616, without appreciating the factual position in the said case and the present case, the assessee's business in the case of Rajeeva Lochan Kanoria [1994] 208 ITR 616 was in the business of acquiring share for managing controlling and rehabilitating different company where as in the present case it was not the business of the assessee as held by the authority below? (d) Whether in the facts and circumstances of the case and in law, the Tribunal is right in restoring the issue of valuation of closing stock of the shares held by the respondent in LKP Merchant Financing Ltd. when the said shares were held as an investment and not as stock-in-trade?" 8. We may firstly consider the first three questions as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed in order to acquire a revenue asset or a capital asset." 10. It may be noted that in India Cements Ltd. [1966] 60 ITR 52 the apex court was specifically pleased to observe that the object of the loan is an irrelevant consideration. In the State of Madras v. G. J. Coelho [1964] 53 1TR 186 (SC) the Supreme Court was dealing with the deduction claimed under section 5(e) of the Madras Plantations Agricultural Income-tax Act, 1955. While considering the issue the court was pleased to observe that in principle there is no distinction between interest paid on capital borrowed for the acquisition of a plantation and interest paid on capital borrowed for the purpose of an existing plantation. Both are for the purpose of the plantati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal nature. But section 36 is differently worded. There is no bar in section 36(1) (iii) to allowance of interest paid in respect of capital borrowed which has been utilised for purchase of a capital asset. The position of law in this regard was explained by the Supreme Court in the cases of India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC) and State of Madras v. G. J. Coelho [1964] 53 ITR 186 (SC)." 12. Considering these judgments and the test that the object of the loan is irrelevant, the interest which was disallowed to the extent of investment will have to be allowed as held by the Tribunal. 13. In so far as question (d) is concerned, as noted the Assessing Officer and the Commissioner of Income-tax (Appeals) proceeded on a wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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