- (1.) This appeal under Section 260A of the Income-tax Act, 1961 ("Act") is at the instance of the assessee and is directed against an order dated May 29, 2003 passed by the Income-tax Appellate Tribunal, "C" Bench, Kolkata, in ITA No.459 (Kol) of 2002 for the Assessment Year 1998-99 by which the Tribunal allowed the appeal preferred by the Revenue and set aside the order of the CIT (Appeals). Being dissatisfied, the executors to the estate of the assessee have come up with the present appeal.
(2.) The facts giving rise to filing of this application may be summed up thus: a) The assessee during his lifetime carried on business of dealing in shares and money lending. The assessee had also made some investments and was the owner of a house property from which he was in receipt of rental income. b) The assessee used to borrow funds for the purpose of his business and used to pay interest on such borrowed sum to his creditors and claimed deduction in computing his business income. The particulars of the capital of the assessee, unsecured loans taken by him, investments made, loans given and stock-in-trade for the financial years ending on March 31, 1995, March 31, 1996, March 31, 1997 and March 31, 1998 are set out below : JUDGEMENT_1239_TLCAL0_2011_1.html
(3.) A Division Bench of this Court at the time of admission of this appeal formulated the following substantial questions of law for determination: "(a) Whether the Tribunal was justified in law in restoring the disallowance of interest expenditure of Rs.6,03,930/- incurred by the assessee for the purpose of his business which was deleted by the Commissioner of Income Tax (Appeals) and its purported findings in that behalf are arbitrary, unreasonable and perverse. "(b) Whether the Tribunal was justified in law in ignoring the assessee s profit and loss accounts, balance sheet, computations, details etc. for the assessment years 1995-96 to 1998-99 and the assessments/intimations for the assessment years 1995-96 to 1997- 98 based on which the Commissioner of Income Tax (Appeals) had granted relief to the assessee and which are all before the Tribunal." After going through the materials on record, we find that the Assessing Officer has refused the claim of payment of interest as business expenditure by making following observations: "2. In the Profit & Loss A/c, the assessee debited a sum of Rs.6,20,767/- as interest paid. Obviously interest was paid on loan taken by the assessee. It is required, therefore, to be examined whether the loan fund was utilised for the purpose of business. The details of loan were called for. It is found that most of the loans were taken in the immediate proceeding year and the balance carried over to this assessment year. The assessee filed details of such loans. From the details, it is found that the assessee obtained substantial amount of loan from various parties and at the time of substantial amount of loans were given to different parties. It is also found that loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of loan. The assessee acted as conduit of such loan transactions. However, the assessee debited substantial amount of interest, but very negligible amount of Rs.26,782/- was recovered from the loan given against loan of Rs.6,20,747/- debited to the P&L A/c. From the Balance Sheet it is also found that the interest so debited is not related to the business transactions. Out of Rs. 98,88,315/- i.e. the balance standing on 31.03.97 which is carried over to this asstt. Year an amount of Rs.12,50,000/- has been utilised for the purchase of shares. It is also noted that in some cases, loans were almost transferred to other parties on the same date of receipt. For the sake of convenience, the loan transactions particularly immediate proceeding asstt. Year may be summarised as follows:- JUDGEMENT_1239_TLCAL0_2011_2.html;