TMI Blog1991 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nies, working as a registrar for several other companies and also trading in fertilizers, yarn, gunny exports, plastics and agencies. In addition to business income, it has also derived income from interest on securities, property and dividends. The assessee-company was incorporated in 1946. As per its memorandum of association, it was also to acquire all the shares in the companies held by the firm, Jardine Skinner and Co., which was an old establishment and a well-known managing agency house. The assessee borrowed money from time to time through several overdraft accounts with banks. Such overdrafts were utilised by it in the course of its trading activities, in advancing loans to and financing the companies in the agency and realising in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and allowance of the same as a deduction against dividends. The Tribunal, after an elaborate discussion of the matter in dispute held that the interest paid was in respect of borrowals for the purpose of the assessee's business and that no portion of such interest paid could be said to be an expenditure wholly and exclusively laid out for the purpose of earning or making dividend income which was only an incidental benefit. They, therefore, directed the authorities below to allow deduction of the entire interest from business income and not to allocate any portion of such interest to dividend income and consequent deduction therefrom. In the assessment year under reference, the Tribunal followed the above order as the facts except with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income cannot be sustained on the materials on record. Dr. Pal, however, appearing for the assessee, has contended to the contrary. He has also relied on several decisions in support of his contention that the Tribunal has come to the correct conclusion on the facts of this case. The question in the present reference is whether the entire amount of interest paid should be allowed as a deduction in computing the profits and gains of the assessee's business. The Tribunal found firstly that the assessee is not a dealer in shares. Nor does it carry on the business in holding of investments. Its business is that of a managing agency. Secondly, the shares held by the assessee were with a view to retain the managing agency and were also nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived is only an incidental benefit. The finding of fact that the interest paid is in respect of the borrowal for the purposes of the business and no portion of such interest paid can be said to be an expenditure wholly and exclusively laid out for the purposes of earning or making dividend income has not been challenged by raising any appropriate question as to whether such finding is a perverse one or whether such finding is based upon any material or evidence. In that event, the said finding cannot be challenged otherwise. It is the categorical finding of the Tribunal that the borrowal for the purchase of the shares was for the managing agency business of the assessee and to retain its grip over the managing agency business. Dr. Pal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be allowed under the head "Business" and cannot be apportioned under two different heads, i.e., business and dividend. Even if the income of the assessee was solely referable to dividend, there cannot be any apportionment. In this case, as we have already indicated, the assessee is not a dealer in shares nor does it carry on business in the holding of investments. The Tribunal took note of the fact that the Appellate Assistant Commissioner, in his order for assessment year 1964-65, which is the main speaking order on the issue, found that the shares held by the assessee were with a view to retain the managing agency and were also necessary for such retention. It, therefore, follows from this finding that the investment of borrowed mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip over managing agency business is essentially a question of fact. The Tribunal approved the finding of the Appellate Assistant Commissioner that interest was paid on the borrowal for the purposes of investment in shares of the managed company and such investment was for the purposes of the business of the assessee and the borrowal itself is for the purposes of the business. Once it is held that the borrowal is for the purposes of the business, we look no further and the interest which is paid on the capital borrowed for the purposes of the business is to be fully allowed. Even if capital has been borrowed for the purchase of securities which do not produce any taxable income, such interest is to be fully allowed. A similar question ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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