ASSTT. CIT V. ALKAPURI INV. PVT. LTD.

TAXAP/262/2000

AI Insights

The case revolves around a dispute concerning the deduction of interest expenses related to investments in shares of domestic companies from the gross total income while computing the deduction under Section 80M of the Income Tax Act. The Assistant Commissioner of Income Tax (ACIT) challenged the ITAT's decision, which had upheld the CIT(A)'s directive to deduct a specific amount of interest from the dividend received by Alkapuri Investment Pvt. Ltd. The High Court's judgment affirmed the ITAT's decision, emphasizing that the deduction under Section 80M should be calculated after considering the interest expenses directly attributable to the investments.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 687811 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 13-10-2014
• Assessment Year: misc
• Other Referred Cases: Distributors (Baroda) Pvt. Ltd vs. Union of India & Others (155 ITR 120)
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: MAUNA BHATT
• Keywords: Assessment Order; Dividend; Income Tax; Interest deduction; Investment
• Section: 143(3); 80M

Judgement Text

"O/TAXAP/262/2000 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 262 of 2000 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ ASSTT. CIT....Appellant(s) Versus ALKAPURI INV. PVT. LTD.....Opponent(s) ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 MR RK PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 5 O/TAXAP/262/2000 JUDGMENT Date : 13/10/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgement and order dated 28.02.2000 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (ITAT) in Income Tax Appeal No. 5748/Ahd/1991 for the assessment year 1985- 86, the revenue has preferred the present tax appeal raising the following substantial question of law: “Whether the Apellate Tribunal is right in law and on facts in treating the investment of Rs. 10,49,72,000/- as having been made by the assessee from his own funds for granting relief under Section 80M of the Act and in doing so failed to examine the relevant circumstances and material available in the case” The appeal came to be admitted for considering the aforesaid question. 2. The Assessing Officer while passing the assessment order noted that in the original assessment it was claimed by the assessee that the entire interest expenses were attributable to income other than the dividend income and therefore the gross amount of dividend was eligible for deduction u/s 80M of the Act. The original assessment u/s 143(3) dated 25.03.1988 was set aside by CIT and the issue was restored back to the AO for reconsideration. While passing a fresh order, the AO rejected the claim of the Page 2 of 5 O/TAXAP/262/2000 JUDGMENT assessee. 2.1 Being aggrieved by the order of the Assessing Officer, the assessee filed appeal before the CIT(A) and after considering submissions of both the sides, CIT(A) directed the AO to deduct the amount of interest attributable to the investments which came to Rs. 6,73,863/- from the dividend revceived by the assessee from domestic companies and compute the deduction u/s 80M on the net amount. 2.2 Being aggrieved by the order of the first appellate authority, the revenue preferred appeal before the ITAT and the Tribunal vide impugned order dated 28.02.2000 dismissed the appeal and confirmed the order passed by CIT(A). Being aggrieved by the said order, the present appeal is filed. 3. Mr. Manish Bhatt, learned Senior Advocate appearing with Ms. Mauna Bhatt, learned advocate for the revenue submitted that the Tribunla has erred in law and on facts in directing to treat the investment of Rs. 10,49,72,000/- as having been made from own funds and thereby allowing relief under section 80M of the Act. He submitted that in the return of income the assessee has claimed that no interest is attributable to the funds used for investment on which interest is earned. 4. Learned advocate appearing for the respondent supported the impugned order and submitted that the Tribunal has rightly held in favour of the respondent. He submitted that the present appeal lacks merits and therefore deserves to be dismissed. Page 3 of 5 O/TAXAP/262/2000 JUDGMENT 5. We have heard learned advocates for both the sides and perused the orders passed by the CIT as well as the Tribunal. The Tribunal in the impugned judgment and order has observed that the amount of interest on borrowings for purchase of shares has to be deducted from the gross total income. 6. As a result of hearing and perusal of records, we are in complete agreement with the reasonings adopted and findings arrived at by the Tribunal. The decision in the case of Distributors (Baroda) Pvt. Ltd vs. Union of India & Others (155 ITR 120) was considered by the Tribunal wherein it is held that the deduction required to be allowed u/s 80M has to be calculated with reference to amount of dividend computed in accordance with the provisions of the Income Tax Act and forming part of the gross dividend received by the assessee. The Tribunal rightly held that the the CIT(A) was justified in holding that the interest attributable to acquisition of shares of domestic companies has to be deducted from the gross total income which includes dividend from the domestic companies before computation of deduction u/s 80M of the Act. We therefore answer the issue in the affirmative and against the revenue and in favour of the assessee. 7. In the premises aforesaid, appeal is dismissed. No costs. (K.S.JHAVERI, J.) Page 4 of 5 O/TAXAP/262/2000 JUDGMENT (K.J.THAKER, J) divya Page 5 of 5 "