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TMI Blog1983 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the deletion of the disallowance of interest of Rs. 5,04,537 made by the Income-tax Officer ? 2. Whether, on the facts and in the circumstances of the case and in the alternative, the Tribunal was justified in restricting the disallowance of the assessee's claim of interest to Rs. 2,14,984 ? 3. Whether, on the facts and in the circumstances of the case, there were any capital gains 'arising' to the company between April 1, 1946, and March 31, 1948 ? 4. Whether, on the facts and in the circumstances of the case, the company could be said to 'possess' accumulated profits to the extent necessary to cover the net debits to the assessee's accounts ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 122 ITR 700 and in the case of Sheila Kaushish v. CIT [1981] 131 ITR 435. We accordingly answer question No. 6. We will notice the facts relevant for answering questions Nos. 1 and 2. For the assessment year 1962-63, the assessment of Shri R. Dalmia was completed on March 13, 1967, on a total income of Rs. 26,76,789 as against a loss of Rs. 5,83,375 returned by the assessee in addition to which a carry forward of loss from earlier years had also been claimed. The assessee had claimed to deduct, in computation of his total income, interest payments aggregating to Rs. 5,04,537, the details of which appear in the statement at serial No. 7 of annexure-1. The Income-tax Officer was of the opinion that on the basis that had been adopted in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier years. In his adjusted balance-sheet, Shri Ganesan attempted to show that there is actually a surplus of Rs. 73.71 lakhs. His further contention which is material for our purpose was that on the liabilities side, a sum of Rs. 55.77 lakhs is shown as due to the shareholders of Dalmia Jain Airways Ltd. Of this, a sum of Rs. 47.31 lakhs has been treated as the assessee's income from an adventure in the nature of trade for the assessment year 1960-61 and this assessment has been confirmed by the Tribunal, vide order dated August 23, 1969, in ITA No. 1004 of 1968-69. The inference sought to be drawn was that it meant that there was no loan to this extent. The Tribunal came to the conclusion and summarised its conclusions on this issue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith interest payment Rs. 5,04,537 Deduct interest credited Rs. 19,846 -------------- Rs. 4,84,691 -------------- It is necessary to elaborate a little about this sum of Rs. 47.31 lakhs which has been treated as the assessee's income from an adventure in the nature of trade for the assessment year 1960-61. The facts are that A Ltd. was floated as public company on July 9, 1946, with a subscribed and paid up capital of Rs. 3 1/2 crores in the form of 35 lakhs shares of Rs. 10 each. Another company, B Ltd., was incorporated as a public company on March 11, 1948, but was converted into a private company on April 26, 1952. A shareholder filed petition for the compulsory winding up of A Ltd. That company, however, went into voluntary liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Asia Udyog (P) Ltd.) it was agreed that, after the expiry of five years from the date of the passing of the scheme, B Ltd. should transfer to the assessee its liability regarding whatever amount remained unpaid to the members of A Ltd. under the scheme, within one year after the expiry of five years. On September 26, 1958, another agreement was executed between the assessee and B Ltd. whereby the company agreed to transfer its liability for the payment to be made to the shareholders of A Ltd. in accordance with the scheme amounting to Rs. 67 lakhs against a consideration of Rs. 67 lakhs, and the assessee took over that liability to pay the shareholders of A Ltd. This agreement came into force on October 1, 1958. As on October 1, 1958, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to the conclusion that the dominant intention of the assessee was to embark on an adventure in the nature of trade and the gain resulting to the assessee therefor was taxable in his hands as income from his business. The assessee was unsuccessful in getting this judgment set aside by the Supreme Court. The result is that this sum of Rs. 47.31 lakhs has been treated as the assessee's income from an adventure in the nature of trade for the assessment year 1960-61 and the assessment has been confirmed by the Tribunal whose view has been upheld by this court. By making this adjustment, an effective balance-sheet as on September 30, 1961, was drawn up on behalf of the assessee. As per the balance-sheet, Dalmia Jain Airways Ltd. shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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