ITAT allows appeal, overturns interest disallowance for assessee. Nexus not established between funds. Tribunal decisions hold weight.

The ITAT allowed the appeal in favor of the assessee, deleting the disallowance of interest for the assessment years 1982-83 to 1984-85. The ITAT found no nexus between the funds used for shareholding and bank loans, contrary to the AO's decision. They disagreed with the CIT(A)'s stance that Tribunal decisions do not become law and emphasized that the assessee should receive relief based on consistent findings. Consequently, the ITAT ordered the AO to permit the claimed interest for the relevant assessment years.

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Issues:
- Rejection of application under s. 154 seeking deletion of deemed interest of Rs. 36,000 in the assessment years 1982-83 to 1984-85.

Detailed Analysis:

1. The AO disallowed the claim for interest of Rs. 36,000 in each of the three assessment years based on the assessment order for the year 1981-82 where interest-bearing funds were utilized for acquiring shareholding of another company, considered as capital expenditure not for the assessee's business purposes.

2. The assessee applied under s. 154 for rectification, citing the Tribunal's order for the year 1981-82 where a similar disallowance was deleted. However, the AO rejected the application stating that the Tribunal's decision for 1981-82 did not automatically apply to subsequent years.

3. The CIT(A) upheld the AO's decision, stating that the principle of res judicata did not apply to income-tax proceedings. He emphasized that decisions of the Tribunal in earlier years do not become law and can be challenged in higher courts. He suggested the assessee could have appealed against the assessment orders for the years in question.

4. The assessee argued that the Tribunal's order for 1981-82, deleting the disallowance, should apply to subsequent years as the facts remained the same. The counsel highlighted the lack of nexus between bank loans and the amount paid for shareholding, as established by the Tribunal.

5. Upon reviewing the submissions and the Tribunal's decision for 1981-82, the ITAT found no nexus between the funds used for shareholding and bank loans. They noted that the disallowance in subsequent years was based on the 1981-82 assessment order, and the grounds were similar. The ITAT disagreed with the CIT(A)'s view on the Tribunal's decisions not becoming law and granted relief to the assessee by deleting the disallowance of interest for all three years.

6. The ITAT concluded that the assessee deserved relief based on the Tribunal's findings and ordered the AO to allow the claimed interest for the assessment years in question. The appeals were allowed in favor of the assessee.

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