Law: Income Tax Act, 1961

Section: 40,58

(a) Income-tax---Business expenditure---Other sources---Deductions from income from other sources---Disallowance of interest under Ss. 40A(8) & 58(2)--­Disallowance not applicable to miscellaneous finance company--­Decision by CIT in relation to assessment years 1983-84 and 1984-85 that assessee was a miscellaneous financial company ---Assessee was entitled to deduction of interest in assessment years in question---Indian Income Tax Act, 1961, Ss. 40A & 58. (b) Income-tax--- ----Revision---Appeal---Rectification of mistakes---Powers of CIT under S.264 Disallowance of interest under Ss.40A(8) & 58(2)---Appeal against quantum of disallowance---Subsequent petition for rectification on the ground that assessee was a miscellaneous finance company and hence Ss.40A(8) & 58(2) were not applicable to it---Dismissal of rectification proceeding by ITO and proceedings under 5.264 by CIT not correct---Indian Income Tax Act, .1961, Ss. 40A, 58, 154 & 264. The assessee objected to the disallowance of interest payments under sections 40A(8)/58(2) of the Income Tax Act, 1961, and clamed that only amounts attributable to business could be disallowed. On appeal, the Commissioner of Income-tax (Appeals) accepted the claim and modified the orders. Subsequently, the, assessee filed a petition under section 15.4 of the Act for rectification on the ground that since the assessee was a miscellaneous financial company, sections 40A(8)/58(2) The petition was dismissed. A revision was preferred under section 264 of the Act. The Commissioner of income-tax dismissed the petition on a technical ground holding that since an appeal was preferred against disallowance of interest the order could not have been rectified under section 154 in view of subsection (1A.) of section 154. On a writ petition filed for quashing of the orders: Held, that no appeal was filed against the order of the Income-­tax Officer refusing to, rectify the assessments under section 154. The question whether sections 40A(8)/58(2) was applicable to the assessee or not, was not the subject-matter of appeal to the Commissioner (Appeals)' whereas the only point raised in the appeal was regarding the…

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