Law:

Section:

Section 57 of the Income-tax Act, 1961 - Income from other sources - Deductions - Assessment years 1962-63 and 1963-64 - Assessee Company purchased certain shares of Company B in names of its directors and one 'T' - Subsequently said shares were sold to assessee on same date and sellers were paid off by taking loan from a firm - Tribunal took a view that assessee did not purchase said shares for purpose of dealing in them, but apparent object of assessee was to acquire controlling interest of Company B - Tribunal thus, held that interest paid on amounts borrowed by assessee could not be allowed as business expenditure - However, Tribunal directed ITO to allow deduction of interest payment under section 57 against dividend income derived from said shares - Whether though ultimate or ulterior motive of assessee might have been to confer controlling interest to himself, yet immediate purpose for acquisition of shares was to earn income from dividends thereof - Held, yes - Whether, therefore, Tribunal was justified in holding that assessee was entitled to deduction under section 57 - Held, yes FACTS The assessee company carried on business as selling agents and also in speculation and in other commodities. The assessee purchased certain shares in company B in names of its director and one T. The shares were in turn sold to the assessee on the same date and sellers were paid off by taking loan from a firm. For the relevant assessment years the question came up before the ITO was whether the interest paid on the amounts borrowed by the assessee for purchasing the aforesaid shares was allowable as business expenditure. The ITO found that the said shares were purchased with a view to acquiring controlling interest in the B. The said shares were purchased neither for dealing nor for investment. The said shares were sold subsequently by the assessee to the members and/or nominees of the K family some of whom became the directors of the company B. Accordingly, the ITO disallowed the deduction claimed by the assessee. On second appeal the Tribunal came to conclusion that the assessee did not purchase the said shares for the purpose of dealing in them, the apparent object…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492