- (1.) BY means of the present application filed under s. 256(2) of the IT Act, 1961, hereinafter referred to as 'the Act', the CIT, Meerut seeks to direct the Income -tax Appellate Tribunal, Delhi, hereinafter referred to as 'the Tribunal' to draw a statement of the case and refer the following question of law for opinion of this Court : "Whether, in the facts and circumstances of the case, learned Tribunal was justified in deleting the disallowance of Rs. 4,65,539 made on account of interest on term loan -
(2.) WE have heard Sri A.N. Mahajan, learned standing counsel for the Revenue and have perused the order dt. 16th
(3.) WE find that under the agreement entered into by the respondent assessee with Hong Kong and Shanghai Banking Corporation, a term loan was sanctioned for being utilised for a particular project. For one reason or the other the project could not take off during a substantial part of the previous year relevant to the assessment year in question and the respondent -assessee as a prudent businessman invested the entire amount of term loan of Rs. 30,00,000 in the equity shares of M/s Samtel India Ltd. and M/s Teletube Electronic Ltd. with whom the respondent assessee was having business relations. It may be mentioned here that the respondent assessee had shown a sum of Rs. 5,84,000 as income from dividend in respect of the investment made by it in the shares of other companies and the respondent assessee has paid a sum of Rs. 4,65,539 towards interest to Hong Kong and Shanghai Banking Corporation. The assessing authority had disallowed the claim of the interest on the ground that the amount of term loan was not utilised for the purpose for which it was sanctioned and, therefore, it cannot be said to have been utilised for the purpose of the business. The claim of the respondent assessee was, therefore, not admissible under s. 36(1)(iii) of the Act. The alternative plea for deduction under s. 57(iii) of the Act was also not accepted. The order was upheld in appeal by the CIT(A). However, the Tribunal has accepted the claim of the respondent assessee both under s. 36(1)(iii) and in the alternative under s. 57(iii) of the Act on the ground that the respondent assessee had spent a sum of Rs. 24,84,460 in acquiring/creating fixed assets from its internal accrual during the year under consideration and, therefore, it cannot be said that the term loan had not been utilised. Moreover, we find that in the memorandum and articles of association of the respondent assessee, investment in shares was specified and the respondent assessee under law could be treated to be doing business of investment in shares, therefore, the interest paid by it to Hong Kong and Shanghai Banking Corporation is allowable. Even, otherwise it has been found that the respondent -assessee had earned dividend of Rs. 5,84,000 during the year under consideration and merely because no dividend has been received in respect of the invested amount by it in the two firms could not make any difference in view of the decision of the apex Court in the case of CIT vs. Rajendra Prasad Moody 1978 CTR (SC) 141 : (1978) 115 ITR 519 (SC). In view of the aforesaid discussion, we are of the considered opinion that the order of the Tribunal does not suffer from any legal infirmity. The findings recorded by the Tribunal for deletion of the disallowance of Rs. 4,65,539 is based on appreciation of evidence and material on record and is in conformity with the principle laid down by the apex Court in the Rajendra Prasad Moody's case (supra). Thus, it does not give rise to the question of law proposed by the CIT, Meerut. The application is accordingly rejected.;