1993 (12) TMI 19

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....ficer rejected the claim and allocated the interest payments between the business income and the dividend income on the basis of the formula suggested by the Income-tax Appellate Tribunal by its order dated February 23, 1974, passed in Appeals Nos. 941 to 944/(Ahd.) of 1972-73 for the assessment years 1966-67 to 1969-70. The Appellate Assistant Commissioner also rejected the claim of the assessee. Hence, the assessee filed an appeal before the Tribunal. Before the Tribunal, the following grounds were raised at the time of hearing of the appeal : " (i) The appellant was having business income in the form of interest and, hence, while determining the business income, the entire interest paid should be adjusted against interest receipts irr....

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....f interest should be bifurcated proportionately between (a) interest received and share from the firm which constitutes business income, and (b) dividend income taxable under the head " Other sources ". Being aggrieved by the said order, the assessee filed a reference application and the Tribunal has referred the following two questions for our opinion under section 256(1) of the Income-tax Act, 1961 : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in not allowing the claim of the appellant that the entire interest payment should be allowed as business expenditure for (a) assessment year 1974-75, and (b) assessment year 1975-76 ? 2. In the event of question No. 1 being answered in the....

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....ing such income." In view of the aforesaid provisions, it can be stated that, on the facts and in the circumstances of the case, the Tribunal was right in law in not allowing the claim of the assessee that the entire interest payment should be allowed as business expenditure for (a) assessment year 1974-75, and (b) assessment year 1975-76. There is nothing on record to establish that the entire amount of interest was paid in respect of capital borrowed for the purposes of the business. Hence, question No. 1 is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Regarding question No. 2, the Tribunal has considered the said contention in paragraph 11 of its judgment. In the said order, the Tribunal has....