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TMI Blog2024 (4) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... al has also decided the appeal being ITA No.2329/Ahd/2000 with CO No.78/Ahd/2003 for Assessment Year 1996-97 in case of M/s. Akalu Holdings Private Limited in the said common order. 2.2. The Tribunal decided ITA No.2329/Ahd/ 2000 as a lead matter and followed the reasoning in the ITA arising in the case of the respondent-assessee being ITA No.2339/Ahd/2000 for Assessment Year 1997-98. 2.3. The Revenue has proposed the following question of law in the Tax Appeal which was not admitted by this Court by order dated 20.12.2006 : "Whether the appellate tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the disallowance of interest which was made by the Assessing Officer u/s. 36(1)(iii) on the ground that the purchase of shares was mainly for acquiring controlling rights in another company" 2.4. The order passed by this Court dated 20.12.2006 reads as under : "Heard Shri M.R.Bhatt, learned counsel for the appellant -Revenue. The following substantial question of law is proposed for admission of this appeal. "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act is that income tax is one tax. Section 6 of the IT Act, 1922, classifies the taxable income under different heads for the purpose of computation of the net income of the assessee. Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not case to be part of income from business if the securities are pat of the trading assets. Whether a particular" income is pat of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principal. 6.1 A useful reference may also be also made to the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Cotton Fabrics Ltd. (1981) 131 ITR 99 (Guj.) in which it was held as under : "Held, (i) that though the total income of the assessee was in the course of its business, it deprived part of its income from dividends and computation of that income from dividends was to be done in accordance with the provisions of Ss.56 and 57. But the computation having been so done, ultimately it still formed part of the income of the business of the assessee and it was assessable as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s case also main object of the company was to carry on the business of acquiring, holding and selling of shares and debentures, the Tribunal has rightly considered the case of the Ormerods (India) Pvt. Ltd. (Supra), which has been approved by the Hon'ble Supreme Court in the case of Seth R. Dalmia Vs. CIT, 110 ITR 644 (SC) wherein Bombay High Court's decision has been quoted and approved as under : "Apart from these decision of this Court, a number of decision of the High Courts have also taken the same view. In Ormerods India (P) Ltd. v. Commissioner of Income Tax (1959) 36 ITR(Bom), the Bombay High Court allowed certain sums of money paid as interest on borrowed capital for the purchase of shares and held that the word "purpose" in the expression "expenditure incurred solely for the purpose of making or earning such income, profits or gains" do not mean motive for the transaction, much less scan it mean ulterior motive or ulterior object. The Court held that as the investments were made for the purpose of deductible under Section 12(2) of the Act. ............ ............ In Commissioner of Income Tax v. H.H.Maharani Vijaykuverba Saheb of Morvi (1975) 100 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT (Appeal) as well as the Tribunal both have found that borrowings were for the purpose of business. Whether the borrowings were for the purpose of business or not, is basically based on the finding of fact. Considering the concurrent finding of fact, we see no perversity in the order. No case is made out for admission of this appeal. The appeal stands dismissed at the admission stage." 2.5. The above order contains all the facts of the case and therefore the same are not repeated here wherein, the relevant observations of the Tribunal are also reproduced. 2.6. The aforesaid order of this Court was carried before the Hon'ble Supreme Court as stated hereinabove. The Hon'ble Supreme Court passed the following order on May 6, 2008 : "None appears for the respondent, though served. Leave granted. These Civil Appeals are filed by the Department against the decision of the Division Bench of the Gujarat High Court dated 20th December, 2006 in Tax Appeals No.918/2006 and 919/2006. By the impugned judgment, the High Court held that the facts of the present case were similar to the facts in the case of Akalu Holdings Pvt. Ltd. and Aashini Lease Finance Pvt. Ltd, in which the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant aspects have not been considered by the Tribunal and, therefore, the above reasons should not be taken as our conclusion. Therefore, in our view, the High Court had erred in dismissing the appeals on the ground that no substantial question of law arose for determination. For the aforestated reasons, we set aside the impugned judgment dated 20th December, 2006. We restore Tax Appeals Nos. 918/2006 and 919/2006 on to the file of the High Court with a direction to the High Court to dispose of these appeals in accordance with law. Civil Appeals are, accordingly, allowed with no order as to costs." 3.1. Learned Senior Standing Counsel Mr.Varun K. Patel for the appellant-revenue submitted that the Tribunal has not given any independent reasoning for this Tax Appeal but has followed the reasoning given in case of M/s. Akalu Holdings Private Limited (Supra) in ITA No.2329/Ahd/2000. It was submitted that the Tax Appeal No.935 of 2006 was filed challenging the order of the Tribunal in ITA No.2329/2000 before this Court and the same was also dismissed vide order dated 22.12.2006 on the similar line. It was further pointed out that the matter was carried to the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest expenditure is also held fully applicable to this year also. Therefore the assessee's claim of interest expenditure on the funds blocked in these shares is found assessment proceedings the Authorised Representative of the assessee company was asked to explain why the interest expenses should not be disallowed. In response to this the assessee company has submitted it's explanation vide letter dtd. 25.10.99. I have gone through the contention raised by the assessee which are similar to those raised during the assessment proceedings of A.Y. 96-97. Therefore as the facts are same, findings and discussion made in assessment order for A. Y.96-97 on this issue is held applicable to this year also and so assessee's contention is not accepted. Further the assessee has claimedin its reply as under:- "Without prejudice to the above contention we would like to bring to your notice that the company has sold the shares on 28.10.96 hence interest paid for the subsequent period should in any case be allowed. The interest if calculated on advances upto the date of sale of shares i.e. 28.10.96 it works out at Rs. 24476566/- only" Further it is also undeniable hard fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Group has acquired control over A.E.C. Limited he has therefore, concluded that the expenditure is capital expenditure. 3.1. The authorised representative of the appellant submitted before the undersigned that the Assessing Officer has relied upon the assessment order passed by him and the arguments advanced by him in the assessment order for the A.Y. 1996-97. All these arguments were dealt with by the appellant in the submission before me in the appellate proceedings for A.Y. 1996-97. It is further submitted thaht after considering those submissions vide appelate order dated 22.4.1999 have deleted the entire disallowance so made by the Assessing Officer. The A.R. of the appellant submitted that as the facts for this year are similar to the A.Y.1996-87, following the said appellate order, this disallowance should be deleted. 3.2. I have considered the facts of the case and the submission made on behalf of the appellant. I have also perused the appelate order dated 22.4.1999 in appeal No.CIT(A)V/DC(A)SR.1/93/98-99 wherein I have consider and held that the disallowance of interest on this ground was not justified. The relevant para from the said appellate order for A. Y. 1996-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that the respondent-assessee company sold shares which were purchased by utilising the amount borrowed from M/s. Torrent Financiers and Torrent Lease and Finance Private Limited to acquire the shares of Ahmedabad Electricity Company in the financial year 1995-96 i.e. for Assessment Year 1996-97 and thereafter, the shares of the Ahmedabad Electricity Company were sold on 28.10.1996 and thereafter, Ahemedabad Electricity Company was acquired by the Torrent Group and taking such facts into consideration, the Assessing Officer dis-allowed the interest under Section 36(1)(iii) of Act on the ground that the funds borrowed by the respondent-assessee was not utilised for the business purpose. 3.6. It was submitted that however, the CIT (Appeals) followed the appellate order dated 22.4.1999 in the appeal filed for the year 1996-97 which was subject matter of the tax Appeal No.919 of 2006. The CIT (Appeal) as quoted hereinabove agreed with the contention of the representative of the respondent-assessee that the assessee is entitled to carry on the business of purchase and sale of the shares and purchased shares of substantial amount in systematic manner and shares have been purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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