Y.R. Meena, J. - (1.) By this reference application, the following questions are referred for our opinion : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was a financial company within the meaning of Sub-clauses (ii) and (iv) of Clause (c) of Explanation to Section 40A(8) of the Income-tax Act, 1961, and that no disallowance under Section 40A(8) of the said Act could be made in its case ?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the entire amount of interest paid by the assessee on money borrowed has to be deducted in arriving at the profit or loss under the head 'Profits and gains of business' and no part should be apportioned and deducted against the income assessable as 'dividend' ?
(3.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that relief under Section 80M of the Income-tax Act, 1961, should be allowed on the gross amount of dividend received by the assessee and not on the net amount computed after deducting the apportioned interest ?" 2. In the assessment made under Section 143(3)/151 of the Act in 1985, the Income-tax Officer disallowed Rs. 28,769, under Section 40A(8) at 15 per cent. of the interest on unsecured debentures and interest on unsecured loans, on the ground that the assessee is not a financial company. The Income-tax Officer found that the asssessee's main source of income was from speculation in shares and that out of the total profit of Rs. 3,94,533 the speculation profit comes to Rs. 2,30,349. On appeal, the Commissioner of Income-tax (Appeals) held that considering the memorandum and articles of association and the printed accounts of the assessee and in view of Sub-clauses (ii) and (iv) of Clause (c) of the Explanation to sub-section (8) of Section 40A of the Act, the assessee is a "financial company". The view taken by the Commissioner of Income-tax (Appeals) has been affirmed by the Tribunal. 3. In paragraph 3 of the order, the Commissioner of Income-tax (Appeals) has given the reasons as to how the assessee is a financial company. The relevant portion of the order passed by the Commissioner of Income-tax (Appeals) reads as under : "I fully agree with the appellant's contentions. For the purpose of deciding whether a company is a financial company or not, what is relevant is only the principal business carried on by the company and not the extent of the income earned by it. Thus, the position that the major part, of the income is from speculation in shares will not be of any relevance. It is worth noting that even this income from speculation from shares has arisen only out of the investment in shares by the appellant. Substantial part of the assets of the appellant was in the form of investment in shares and of loans and advances made to other parties. For the purpose of Sub-clause (ii) in Explanation (c) it is of no relevance whether the acquisition of shares, securities, etc., was made by the assessee as a dealer or as an investor. The appellant has satisfied the conditions mentioned in Sub-clauses (ii) and (iv) of Explanation (c) to Section 40A(8) and accordingly it is a financial company.";