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TMI Blog2009 (8) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... est payments made towards acquisition of shares of M/s. ICDS Ltd. pursuant to the awards entered into by the directors of the company with other rival factions of the Manipal Pai group would amount to an expenditure incurred during the course of business and was an allowable deduction? (c) Whether the Tribunal failed to take into consideration that the shares were purchased by the assessee company of M/s. ICDS Ltd. at the instance of the directors in order to take hold of M/s. ICDS Ltd. by defeating the Ambani award which had conferred control of this company in favour of its rival faction which did not amount to any business benefit for the assessee-company and consequently recorded a perverse finding ?" 2. Under the impugned order, the Tribunal while allowing the appeal filed by the assessee reversed the finding of the Assessing Officer and the first appellate authority, which had taken the view that certain amounts claimed as business loss of the assessee-company relevant for the assessment year 1996-97, though computed as short-term capital loss, but nevertheless claimed as loss under the head "Profits and gains of the business" cannot be so allowed and further finding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Aravind, learned counsel for the appellant, is that the Tribunal has committed a grave error in concluding that the transaction of purchase and sale of 1,00,000 number of shares of M/s. ICDS Ltd. should have been treated as part of business transaction of the assessee, notwithstanding the fact that the purchase of 1,00,000 number of shares was not as a part of investment and trading activity of the company in the normal carrying on of the business; that the transaction was not as a part of the assessee's trading transactions, but was only as a result of a private settlement entered into by the directors of the company, with the directors of a sister group of companies, who all happened to be members of one family, and such being the nature of the transaction, being not motivated or necessitated by any business exigency or even any business prospects, but to fulfil the obligations of the individual directors vis-a-vis similar directors in a sister group of companies under an arbitration proceeding that had been conducted by Mr. Ambani of the Ambani group, which resulted in an award known as "Ambani award" and, therefore, could never be treated as part of the business activity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consequences as noticed and as found by the Tribunal particularly in the matter of allowing the interest paid on the amount said to have been borrowed for the purchase of shares as a part of the business expenditure also, automatically falls to the ground and, therefore, all the three questions posed for our answer should be answered in the negative in favour of the Revenue and against the assessee. 9. On the other hand, Sri S. Parthasarathi, learned counsel for the respondent-assessee, submits that notwithstanding the fact that the motivation or reason for acquiring 1,00,000 number of shares of M/s. ICDS Ltd. by the assessee-company was as per the award and notwithstanding the award being in respect of a dispute that had arisen amongst the members of the family of the Pai group; that the company itself was being run as a family concern and not much distinction was maintained between the company and the directors of the company, as the very members of the same family were also the directors in the sister group of companies and, therefore, the award cannot be read in isolation, in the sense, de hors the family, the company in which all the members of the family were either share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest cannot be automatically answered against the assessee as a sequel to the answer to the first question in favour of the Revenue and, therefore, would urge that to the extent answer to the second question does not become automatic, but depends on the examination of the fact situation and on ascertainment of the extent of borrowal made by the assessee-company for the purpose of investment in the capital asset, i.e., for the investment of acquisition of 1,00,000 number of shares in M/s. ICDS Ltd. and interest, if any, paid on such borrowal till the disposal of the shares, should necessarily be added to the cost of acquisition of shares by the assessee and on such premise, the loss under the head of short-term capital can be computed. 12. We have bestowed our attention to the submissions made at the Bar, perused the record in the context of the questions posed for our answer in this appeal. 13. We notice that while the first and the second questions do arise for our examination, the third question is only a question which is in the context of the logic employed by the Tribunal for arriving at the findings giving rise to the first and the second questions and, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the derision referred to above and relied on by learned counsel for the appellant-Revenue. In this view of the matter, we have to necessarily answer the first question in favour of the Revenue and against the assessee and in the negative. The Tribunal was in error in holding that the loss incurred by the assessee in the sale of shares held by it should be allowed as a business loss. In fact, the assessee itself having returned this as a loss which is claimed as short-term capital loss, and having computed under the head "Capital gains", that also goes against the claim of the assessee and the Tribunal overlooked this aspect also. 17. In so far as the second question is concerned, it has to necessarily follow the first question, being consequential to the answer given to the first question. However, Sri Parthasarathy, learned counsel for the respondent-assessee has vehemently urged that the assessee should not be deprived of the claim for payment of interest, which could be even otherwise eligible in law and just because the Tribunal committed an error in holding that the loss should have been computed under the head "Profits and gain of business and profession". 18. To this ext ..... X X X X Extracts X X X X X X X X Extracts X X X X
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