1999 (6) TMI 9

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..... d not be allowed as deduction ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in holding that the borrowed money invested from April to August, 1980, had no bearing or nexus to the allotment of shares by the private limited company upon the take-over of the firm in which the assessee was a partner, and that there was no nexus established between the borrowings and the acquisition of shares ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee had a duty and liability to make good the debit balance in his capital account which came about because of the accumulation of losses and that the borrowed amounts wer .....

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..... ontention and allowed the appeals. Hence the Department filed the appeals in the Tribunal. The Tribunal while allowing the departmental appeals found that the borrowings were made in order to liquidate the outstanding debit balance against the partners in the firm's account. The Tribunal further observed that nothing was available to the assessees which could be said to have been utilised in the purchase of shares in the private limited company which ultimately took over the firm in October 1983. The Tribunal noted the fact that the firm made profits after 1980 and the capital accounts of the partners thereafter showed credit balance. It was observed : "The amount invested out of the borrowings from April to August, 1980, had no bearing .....

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..... aid for the acquisition thereof and it would be sufficient if the borrowed amount is utilised for acquiring the shares. In the case dealt with by the Supreme Court the borrowed money was directly invested for the acquisition of shares whereas in the instant case the Tribunal found no nexus between the borrowings and the acquisition of shares. It seems to us that the argument advanced by learned counsel for the assessees before the Tribunal and reiterated before us - that the amounts were invested in order to keep alive the firm which was ultimately taken over by the private limited company, and, therefore, the amounts invested are attributable to the acquisition of shares which yield income from other sources is rather far-fetched. We c .....

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