1998 (2) TMI 97

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... r section 40A(8) of the said Act could be made in its case ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the entire amount of interest paid by the assessee on money borrowed has to be deducted in arriving at the profit or loss under the head 'Profits and gains of business' and no part should be apportioned and deducted against the income assessable as 'dividend' ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that relief under section 80M of the Income-tax Act, 1961, should be allowed on the gross amount of dividend received by the assessee and not on the net amount computed after deducting the apportioned interest ?" .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... worth noting that even this income from speculation from shares has arisen only out of the investment in shares by the appellant. Substantial part of the assets of the appellant was in the form of investment in shares and of loans and advances made to other parties. For the purpose of sub-clause (ii) in Explanation (c) it is of no relevance whether the acquisition of shares, securities, etc., was made by the assessee as a dealer or as an investor. The appellant has satisfied the conditions mentioned in sub-clauses (ii) and (iv) of Explanation (c) to section 40A(8) and accordingly it is a financial company." On the basis of the material facts, whether it is a financial company or not, basically is a question of fact. When there is a concur .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... purpose of business, the interest should be allowed without going into for what purpose the loan has been used and how much income is earned from which source. In view of the above decisions that once the capital has been borrowed for the purpose of business, it is immaterial as to how the borrowed money was applied, the interest payment would be deductible under section 36(1)(iii) of the Act. Therefore, the view that has been taken is that the entire interest payment should be allowed as a deduction for computing the profit or loss under the head "Profits and gains of business" without apportionment of interest, paid for the purpose of business. Accordingly, we answer question No. 2 in the affirmative, i.e., in favour of the assessee and .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X