TaxTMI 
TaxTMI 
2009 (9) TMI 608
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....he circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing interest claimed by the assessee at a higher rate on the borrowings though the investment had been made by the assessee in the shares of a sister concern which gave a fixed return of income ?" 2. The assessee borrowed money from a sister concern and paid interest therein at 18 per cent. per annum and purchased shares from the sister concern which carried dividend at 4 per cent. The Assessing Officer (AO) held that there was no justification to borrow funds at the rate of 18 per cent. interest for making investment in shares, which would give a divi-dend of 4 per cent. only. Having regard to the fact that the borrowing was made from a siste....
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....nish-ing of in- accurate particulars of income." 3. The Commissioner of Income-tax (Appeals) upheld the finding of the Assessing Officer with the following observations : "7.3. I do not find any reason to give relief to the appellant on this account. Another ground that the appellant is entitled to 4 per cent. dividend on these shares that in case of Highway Cycle Ind. Ltd., Ludhiana, for assessment year 1986-87 the Assistant Commissioner of Income-tax has added back the difference of 18 - 4 = 14 per cent. under similar circumstances on the amount borrowed for that com-pany for purchase of similar shares. This plea of the appellant is also rejected as these are non-cumulative preference shares and no divi-dend has been d....
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....hares was very low. We do not agree with the Revenue that the benefit accruing at 4 per cent. from preference shares was not sufficient so as to justify the borrowings at 18 per cent. It is to be noted that the assessee was not dealing in shares and investments had been made as incidental activity of the business. The learned counsel has argued that there was ultimately no effect on the revenue because the assessee as well as the other two parties involved belonged to the same group. Borrowing was made from MAL and shares were purchased from M/s. Hero Inv. Pvt. Limited. Since the transactions were bona fide and not sham, the interest payable to the creditor is found to be inci-dental and wholly for the purposes of business. We are unable to....
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....njal Family Trust and the question arising therefrom was referred for opinion of this court, which has been decided on July 9, 2008 in favour of the assessee and against the Revenue in I. T. R. Nos. 87 to 91 of 1995 (CIT v. Pankaj Munjal Family Trust) [2010] 326 ITR 286 ). 8. Learned counsel for the Revenue, however, submitted that even though, in the case of Pankaj Munjal (supra), this court held that no substantial question of law arose and tax planning was the right of the assessee, the inference by this court that the transactions could not be held to be dubious, is not sound and cannot be treated as a precedent. 9. The question for consideration is whether in dealing with sister con-cerns, a transaction which does n....
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....y J. were not supported by other members of the Bench and the principles in IRC v. Fishers Executors [1926] AC 395 and in IRC v. Duke of Westminster [1936] AC 1, on which the observations in A. Raman and Co. [1968] 67 ITR 11 (SC) and B. M. Kharwar [1969] 72 ITR 603 (SC) were based, still held the field. 13. We may proceed on the basis that tax planning is permissible even if it results in avoidance of tax as observed in Azad Bachao Andolan [2003] 263 ITR 706 (SC). The legitimacy of claim for deduction has still to be made out on the principles of business expediency. In S. A. Builders Limited v. CIT [2007] 288 ITR 1 (SC), it was observed that amount paid as interest for busi-ness was a permissible deduction under section 36(1)(iii....