- (1.) THIS is an appeal under Section 260A of the Income -tax Act, 1961, at the instance of the assessee for the assessment year 1989 -90. During the assessment proceedings, the Assessing Officer disallowed interest of Rs. 87,064 on an amount of Rs. 4,83,687. The Assessing Officer was of the view that the assessee has diverted its fund and purchased agricultural land not for business purpose for a sum of Rs. 4,83,687 and therefore, the assessee was not entitled to deduction of interest thereon. The said portion of the order was set aside in appeal by the Commissioner of Income -tax (Appeals), However, the Tribunal on further appeal at the instance of the Department restored the assessment order on this point and maintained the disallowance of Rs. 87,064. In the appeal the following question of law has been raised: Whether, on the facts and in the circumstances of the case, the Tribunal is legally justified in confirming the disallowance of interest at Rs. 87,064
(2.) HEARD Shri Pawan Shree Agrawal, learned Counsel for the assessee, and Shri A.N. Mahajan, learned standing Counsel for the Department. Learned Counsel for the assessee submits that it is not a case of diversion of fund by the assessee -company. But the assessee had the sufficient fund to purchase the agricultural land for a sum of Rs. 4,83,687. The matter was examined in depth by the Assessing Officer. The Assessing Officer rejected the contention of the assessee that the assessee -com -pany has raised the funds by issuing share capital. The Assessing Officer found that the agricultural land was purchased after taking overdraft from the bank. The Assessing Officer has disallowed interest on the aforesaid amount of Rs. 4,83,687. The Commissioner of Income -tax (Appeals) discussed the matter in paragraphs Nos. 8 and 9 of his order. In paragraph No. 8 of his order he notices that it is true that initially the funds were diverted in investment in purchasing agricultural land with a view to diversify the earning capacity of the company. He also notices that the subsequent funds raised to this effect to the tune of Rs. 5,32,000 would not change the position in favour of the admissibility of interest. However, in subsequent paragraph No. 9 without making discussion the Commissioner of Income -tax (Appeals) observes that the additional funds were raised with the object in view to reduce the extra financial burden of the company, there is no case of making the disallowance of interest in the period relevant to the assessment year 1989 -90. The said finding has been reversed by the Tribunal. The Tribunal has found that the fact remains that there was an overdraft at the time of purchase of land for Rs. 2,33,000 in 1982 -83 and so also during 1983 -84 and in the absence of details of capital and reserves deployed, it cannot be presumed that the same were available for purchase of agricultural land. The said finding of the Tribunal has not been disputed in appeal as perverse or arbitrary. In view of the finding of fact recorded by the Tribunal, we find that the assessee diverted the funds of the company in purchasing the agricultural land and the Department was justified in disallowing the proportionate interest on the sum invested in the purchase of land.
(3.) LEARNED Counsel for the appellant has relied upon CIT v. Prem Heavy Engineering Works P. Ltd. : [2006]285ITR554(All) . The said decision is distinguishable on facts. In that case, a finding was recorded that the asses -see had sufficient fund of amount towards share capital, surplus and reserve as also interest -free advance from the two customers. There is no such finding in the case on hand. Therefore, the said decision does not help the appellant in any manner. The other case relied upon by learned Counsel for the assessee is CIT v. Radico Khaitan Ltd. : [2005]274ITR354(All) . This ruling also has no application to the present case as it was in relation to Sections 28 and 56 of the Income -tax Act and the controversy presently involved was not at all involved therein.;