A.K.Sengupta, J. - (1.) At the instance of the Commissioner, West Bengal-IV, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961 ("the Act"), for the assessment year 1973-74 : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer was not justified in apportioning the total expenditure incurred by the assessee as between the several heads of income and treating the appropriate portion thereof as expenditure against the dividend income and in modifying the assessment accordingly?"
(2.) The facts of the case are that the assessee formerly known as "Birds Investment Ltd.", is a limited company whose income was from interest on securities, business of purchase and sale of shares, dividends and interest, etc. The Income-tax Officer held that the interest paid and part of the other expenses which were claimed as a deduction against the business of purchase and sale of shares were attributable to the earning of dividend on shares of domestic companies. He, therefore, apportioned the expenses under different heads. The result of this was that the loans under the head "Profits and gains of business or profession" were considerably reduced. Aggrieved by this order, the assessee took the matter in appeal to the Appellate Assistant Commissioner contending therein that there was no question of apportionment of the expenses because in the earlier years, the expenses were allowed entirely under the head "Profits and gains of business or profession". The Appellate Assistant Commissioner, following the order of the Tribunal for the earlier years, held that the Income-tax Officer was not justified in allocating any expenses claimed as a deduction in working out the loss from business in purchase and sale of shares towards the earning of income from dividends, etc.
(3.) Aggrieved by this order, the Revenue filed an appeal before the Tribunal. The Department raised the contention that the Appellate Assistant Commissioner erred in rejecting the Income-tax Officer's stand in allocating the expenditure towards the earning of dividend income and in directing the Income-tax Officer to enhance the loss computed under the head "Profits and gains of business or profession" by Rs. 71,113 and also to enhance the income under the head "Income from other sources" by Rs. 71,113. The Tribunal, however, following its earlier order in I.T. Appeal No. 5462 (Cal) of 1975-76, dated April 25, 1977, for the assessment year 1972-73, held that the Appellate Assistant Commissioner was justified in allowing all the expenses under the head "Profits and gains of business or profession".;