ATISH KUMAR MITTAL, J. - (1.) THIS order shall dispose of IT Ref. Nos. 87 to 91 of 1995 in which a common substantial question of law has been referred. 1994, the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as "the Tribunal") has referred the following substantial question of law in the case of the assessee pertaining to the asst. yrs. 1983 -84, 1984 - 85, 1986 -87, 1987 -88 and 1988 -89 for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing interest as claimed by the assessee at a higher rate on borrowings to the nominal fixed expected return on investments made in purchase of shares out of such borrowings from family concerns -
(2.) THE assessee in this case is a family trust. For the asst. yr. 1983 -84, the AO framed assessment under s. 143(3) of assessee. The CIT(Central), Ludhiana, exercising the power under s. 263 of the Act called for the record and noticed that the assessee had taken a loan of Rs. 1,75,000 at 16 per cent, from family concerns which was utilized by it for the purchase of 4 per cent, non -cumulative preference shares. The assessee had claimed a deduction for Rs. 29,277 towards the interest amount from its income for the asst. yr. 1983 -84 which was allowed by the AO. The CIT(Central), Ludhiana, while considering the said assessment order as prejudicial and erroneous to the interests of the Revenue, issued show - cause notice to the assessee for setting aside the order off the AO. After hearing the assessee, the CIT(Central), the reasonableness or otherwise of the interest claimed by the assessee in respect of the borrowings made from the family concerns at a higher rate of interest and investment of such borrowings in shares of closely related companies at a fixed nominal return for times to come. Accordingly, the CIT(Central), Ludhiana, modified the order of assessment and directed the AO to restrict the allowance of interest on the borrowings to the extent of the expected return on the investment made out of such borrowings and disallowed the balance interest as claimed by the assessee. the CIT(Central), Ludhiana, took action under s. 263 of the Act and issued similar directions, vide its order dt. 29th
(3.) THE assessee challenged the order of the CIT(Central), Ludhiana, before the Tribunal. The Tribunal, vide its "It is now well settled that it is not for the Revenue to (sic) a businessman how to conduct his business. The AO when he made the impugned assessments went through the process of law established as per statute and for each of the assessment years under appeal made order under s. 143(3) of the Act. He had pointedly applied his mind and allowed the payment of interest as claimed by the assessee after his judicial satisfaction. It is now settled by the judgment of the Supreme Court in the case of Jain Brothers that officers who are enjoined upon to perform the statutory duties would do so in a bona fide manner unless evidencie is there to show to the contrary. In this case, there is no evidence to the contrary and the CIT has proceeded on the assumption that the AO merely accepted the claim. This type of interference in the assessment orders made after due consideration under s. 143(3) does not fall within the ambit of s. 263 of the Act. The impugned orders of the CIT are, therefore, without justification. They are cancelled as such." For these two assessment years, the Tribunal, on the directions of this Court, has referred the aforesaid substantial question of law for the opinion of this Court.;