2014 (2) TMI 796

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....s follows: "1) Whether the Tribunal was justified in law in holding that the appellant was not entitled to deduction under Section 57(iii) of the Income Tax Act, 1961 in respect of the interest of Rs.13,49,356/- incurred on borrowed funds utilized for making investment in shares on which no dividend was received and the purported findings of the Tribunal in that behalf are arbitrary, unreasonable and perverse?" Mr. Khaitan, learned senior advocate appearing for the appellant assessee submitted that the question is covered by a judgment of the Apex Court in the case of CIT Vs. Rajendra Prasad Moody, reported in 115 ITR 519. He added that the Tribunal did, in fact, notice the judgment, but erred in understanding the true nature and purp....

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....trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense'." Mr. Khaitan submitted that the fact that the assessee borrowed money for the purpose of making investment in shares is not in dispute. The interest paid or incurred by the assessee is also not in dispute. The expenditure on account of interest was a proper expenditure under section 57 of the Income Tax Act, but the same has been disallowed by the Assessing Officer on the ground that investment cannot be said to have been made for earning dividend. The learned Tribunal endorsed that view of the Assessing Officer and reversed the views expressed by the CIT (Appeal). The case of the assessee has always been that : "The assess....

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....63p. He, therefore, contended that in a case like this, there is no reason why this Court should interfere with the views expressed by the Tribunal. We have considered the rival submissions advanced by the learned Advocates appearing for the parties. The provisions contained in sections 56 and 57 of the Income Tax Act are to be read together. Section 56 provides for income from other sources, and section 57 provides for allowable deduction. Mr. Khaitan rightly contended that the expenditure on account of interest was a proper expenditure allowable under section 57. The reason which found favour both with the Assessing Officer and the Tribunal was that the investment was not for the purpose of earning dividend. It could not be followed....