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TMI Blog2002 (8) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2 is in the affirmative, that is to say, the interest difference on the extra amount of Rs. 2.50 lakhs was rightly allowed as a deduction. Both the questions are, therefore, answered in favour of the assessee and against the Revenue. - - - - - Dated:- 28-8-2002 - Judge(s) : A. R. DAVE., D. A. MEHTA. JUDGMENT The judgment of the court was delivered by D.A. MEHTA J.-This is a reference at the instance of the Commissioner of Income-tax, Baroda, for the assessment years 1979-80, 1980-81 and 1981-82. The relevant accounting periods are the financial years 1978-79, 1979-80 and 1980-81, respectively. The Income-tax Appellate Tribunal, Ahmedabad Bench "B", has referred the following two questions for the opinion of this court: "1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said activity resulted in the assessee-company receiving rental income as "income from other sources". For arriving at this conclusion, the Income-tax Officer primarily relied upon the objects clause of the memorandum of association, as, according to the Income-tax Officer, the said clause did not permit the assessee-company to carry on business of hiring out properties. In so far as the payment of interest was concerned, the Income-tax Officer found that the assessee-company had borrowed funds from the bank at the rate of 15 per cent. and had advanced the amount of Rs. 8.50 lakhs to the Hindu undivided family out of the aforesaid funds. Thus, according to the Income-tax Officer, the differential rate of interest, that is, nine per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the extra amount of Rs. 2,50,000 can be allowed as deduction?" The order of the third Member has taken into consideration the figures of rent received and rent paid by the assessee-company for all the three assessment years, which are as follows: ---------------------------------------------------------------------- Assessment year Rent received (Rs.) Rent paid (Rs.) ---------------------------------------------------------------------- 1979-80 4,29,427 1,36,463 1980-81 8,49,672 2,99,852 1981-82 8,49,351 3,23,019 ---------------------------------------------------------------------- The third Member h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad to be assessed as income from business. In relation to the second issue regarding interest, the Tribunal came to the conclusion that, though the agreement between the assessee-company and the Hindu undivided family was for advancing only Rs. 6 lakhs, the advancing of further amount of Rs. 2.50 lakhs was out of commercial expediency and the payment of interest had to be considered from the angle of a businessman. It has been further found by the Tribunal that the additional funds were advanced to the Hindu undivided family so as to enable the Hindu undivided family to complete construction of additional floors, which were to be made available to the assessee-company at the same monthly rent, which was stipulated in relation to floors w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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