Commissioner of Income-tax, Kol-XI v. Gopal And Sons (HUF)
[Citation -2015-LL-0213-43]

Citation 2015-LL-0213-43
Appellant Name Commissioner of Income-tax, Kol-XI
Respondent Name Gopal And Sons (HUF)
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 13/02/2015
Judgment View Judgment
Keyword Tags payment of interest • interest payment • interest income • voting power • karta
Bot Summary: The learned Tribunal has concurred with the following views of the CIT. From assessment order it is apparent that the A.O. himself has computed the interest income under the head Business Income and has disallowed the claim of interest payment of Rs.7,43,926/-. The expenditure incurred by the appellant in the normal course of business are allowable as business expenses as held in the case of Dalhousie Investment Trust Co. Ltd. vs. CIT, 168 ITR 486 , Sarojini Rajesh vs. CIT 71 ITR 504 and K. Sreedharan Co. vs. CIT and others, 202 ITR 796. Even if the A.O s contention is acepted that the interest income was assessable as income from other sources, the interest payment would be allowable as deduction u/s. In view of the above, the A.O. is directed to 4 allow the claim of payment of interest of Rs7,43,926/-. Mrs. Gutgutia, learned Advocate appearing for the revenue was unable to point out any mistake in the reasoning of the CIT which was approved by the learned Tribunal. Whether the payment of interest was allowable is basically a question of fact or at any rate a mixed question of law and fact. In so far as question Nos.1 and 2 are concerned, Mr. Bharadwaj, learned Advocate appearing for the assessee did not dispute that the Karta is a member of the HUF which has taken the loan from the Company and the case is squarely within the provisions of section 2(22)(e) of the Income Tax Act, which reads as follows : any payment by a company, not being a company in which the public are substantially interested, of any sum holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest km.


ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE ITAT No. 73 of 2014 G.A. No. 1881 of 2014 CIT. KOLKATA-XI Versus GOPAL AND SONS (HUF) BEFORE: Hon'ble JUSTICE GIRISH CHANDRA GUPTA Hon'ble JUSTICE ARINDAM SINHA Date : 13th February, 2015. Ms.A.G.Gutgutia, Adv. Mr.R.Bharadwaj, Adv. Court : subject matter of challenge in this appeal is judgment and order dated 27th January, 2014 by which learned Appellate Tribunal allowed appeal preferred by assessee and dismissed counter appeal preferred by revenue. revenue has come up in appeal before this Court. following questions have been proposed by revenue. i) Whether on facts and in circumstances of case learned Tribunal erred in law in deleting 2 addition of Rs.1,2010,988/- as deemed dividend under section 2(22)(e) of Income Tax Act by relying on decision of Mumbai Tribunal in case of Bimal Sevantilal Karodia HUF where assessee was neither shareholder nor beneficial shareholder without considering that in present case assessee HUF is beneficial as well as registered share holder having 37.12% share holding of company and for this order passed by learned Tribunal is perverse and deserved to be set aside ? ii) Whether on facts and in circumstances of case learned Tribunal erred in law in placing reliance on decision of Mumbai Tribunal in case of Bimal Sevantilal Karodia HUF without considering that facts of said case is squarely different from that of present assessee ? iii) Whether on facts and in circumstances of case, learned Tribunal erred in law in deleting addition made in respect of interest payment of Rs.7,43,926/- ? iv) Whether in facts and in circumstances of case, consolidated order dated January 27, 2014 passed by learned Tribunal is perverse and ought to be set aside ? 3 v) consolidated order dated January 27, 2014 passed by Income Tax Appellate Tribunal is otherwise erroneous on facts and/or in law? Question Nos. 3, 4 and 5 relate to deletion of addition made by Assessing Officer. learned Tribunal has concurred with following views of CIT (Appeal). From assessment order it is apparent that A.O. himself has computed interest income under head Business Income and has disallowed claim of interest payment of Rs.7,43,926/-. If there is temporary lull in business activities, it does not mean that appellant has closed its business. In such circumstances, expenditure incurred by appellant in normal course of business are allowable as business expenses as held in case of Dalhousie Investment Trust Co. Ltd. vs. CIT, 168 ITR 486 (SC), Sarojini Rajesh vs. CIT 71 ITR 504 (Mad) and K. Sreedharan & Co. vs. CIT and others, 202 ITR 796. Even if A.O s contention is acepted that interest income was assessable as income from other sources, interest payment would be allowable as deduction u/s. 57 of Act and other expenses debited in P&L A/c would be allowable as business loss. In that situation also, there would be no effect on total income. In view of above, A.O. is directed to 4 allow claim of payment of interest of Rs7,43,926/-. ground No3 is allowed . Mrs. Gutgutia, learned Advocate appearing for revenue was unable to point out any mistake in reasoning of CIT which was approved by learned Tribunal. Whether payment of interest was allowable is basically question of fact or at any rate mixed question of law and fact. learned Tribunal has for appropriate reasons upheld views expressed by CIT (Appeal) and we find no substance in appeal preferred by revenue on this score. In so far as question Nos.1 and 2 are concerned, Mr. Bharadwaj, learned Advocate appearing for assessee did not dispute that Karta is member of HUF which has taken loan from Company and, therefore, case is squarely within provisions of section 2(22)(e) of Income Tax Act, which reads as follows : any payment by company, not being company in which public are substantially interested, of any sum (whether as 5 representing part of assets of company or otherwise) (made after 31st day of May, 1987, by way of advance or loan to shareholder, being person who is beneficial owner of shares (not being shares entitled to fixed rate of dividend whether with or without right to participate in profits) holding not less than ten per cent of voting power, or to any concern in which such shareholder is member or partner and in which he has substantial interest (hereinafter in this clause referred to as said concern)) or any payment by any such company on behalf, or for individual benefit, of any such shareholder, to extent to which company in either case possesses accumulated profits; Therefore, question No.1 is answered in affirmative. Question No.2 need not be answered. appeal is thus disposed of. (GIRISH CHANDRA GUPTA, J.) (ARINDAM SINHA, J.) km Commissioner of Income-tax, Kol-XI v. Gopal And Sons (HUF)
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