TMI Blog2006 (2) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... na vs. Addl. CIT (1987) 62 CTR (SC) 14 : (1987) 166 ITR 176 (SC). 2. The facts in brief are that the assessees Sh. Manohar Das Agarwal paid interest of Rs. 6,62,591 and Sh. Rajiv Agarwal paid interest of Rs. 6,60,299. The claim of the assessees remained that these interest were paid to Eurasia Finance Co. (P) Ltd. on loan of Rs. 25,00,000 each taken for the purpose of investment in purchase of shares of Rs. 25,00,000 of M/s Jaipur Syntex Ltd. The assessees had received crossed account payee cheques from Eurasia Finance Co. (P) Ltd. on 28th Nov., 1994 which they had deposited in their bank accounts with SBI, Sanganeri Gate, Jaipur and on the same day issued cheques for the same amount of Rs. 25,00,000 each in favour of Jaipur Syntex Ltd. for purchase of shares. The assessees before the AO also submitted confirmations about purchase of shares and about taking on loan from the concerned party. The claim of deduction of interest by the assessees was denied by the AO on the basis that copy of bank account of the above companies in support of withdrawals or investment and copy of accounts of assessee in the books of companies, proof of investment in shares, allotment of shares with sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT vs. Rajendra Prasad Moody had found the additions made to be unjustified and therefore, he had deleted the total addition of Rs. 7,88,730 for interest paid for purchase of shares in the preceding year, treating the same as allowable under s. 57(iii) of IT Act. He refers page Nos. 8 to 10 of the paper book, i.e., copies of assessment order and first appellate order for the asst. yr. 1997-98 in support. Against this order of the first appellate authority, the Department did not prefer second appeal. He places reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. Shivsagar Estate (2002) 177 CTR (SC) 107 : (2002) 257 ITR 59 (SC), wherein the civil appeal and SLP were dismissed by the Hon'ble Court having regard to the fact that no appeal was filed against the orders of identical assessment for the previous year. The AO has tried to distinguish the facts for the asst. yr. 1996-97 for the reason that after purchase of shares of M/s Jaipur Syntex Ltd. the assessees have become directors in the said company and therefore the deduction is not allowable. The learned Authorised Representative submits that becoming a director is consequential effect of purchasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, it is necessary that the primary motive of incurring is directly related to earn income falling under the head "Income from other sources". Where, admittedly, shares in a company were purchased by the assessee for the purpose of acquiring controlling interest in the company and not for earning dividend, held the Hon'ble Court, that the expenditure incurred by way of interest on the loan taken by the assessee for the said purpose could not be held to be expenditure incurred wholly and exclusively for the purpose of earning income by way of dividends. In that case before the Hon'ble Court, the assessee had purchased shares in Raval Tiles and Marbles (P) Ltd. for Rs. 2.07 lakhs at par after January, 1972. Her husband also purchased shares in the said company during the same period at par of face value of Rs. 1,77,500 and her father-in-law, Korshi Hirji Shah, purchased shares during the same period of Rs. 34,500. Thus the entire shareholding of Rs. 4.19 lakhs in the said company was purchased by the assessee, her husband and her father-in-law in a couple of months after January, 1972. In her assessment for the asst. yrs. 1976-77, 1977-78 and 1978-79, the assessee claimed deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of CIT vs. Rajendra Prasad Moody, as discussed above in the submission of the learned Authorised Representative is clearly applicable in the facts of the present case. We, thus, uphold the findings of the learned CIT(A) in this regard. 6. In the result, ground Nos. 1 and 2 of the appeals as well as the appeals are rejected. 7. C.O. Nos. 7 and 8/Jp/2004: The first appellate orders have been objected by the assessees on the following common grounds that the learned CIT(A) has erred in: (i) not accepting the plea of the appellant that the learned AO is wrong, unjust and has erred in law in initiating proceedings for reassessment and in issuing notice under s. 148 of IT Act, 1961 and (ii) rejecting plea of the appellant that the learned ITO Ward-6(1). Jaipur has wrongly assumed jurisdiction over the case of appellant and on this account the entire assessment proceedings and assessment completed by him is wrong and bad in law. 8. Objection No.1 8.1. In support of this objection, the learned Authorised Representative submits that notice under s. 148 of the act issued by the AO, Mumbai remained unserved, for the reason that same addition was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validly initiated proceedings under s. 148 and, therefore, the ground No. (1) of assessee is accordingly dismissed." We thus reject the objection No.1. 9. Objection No.2 9.1. In support of this objection, the learned Authorised Representative submits that only case and record for single assessment (for the asst. yr. 1996-97) was transferred from Mumbai to Jaipur for which the assessee had raised strong objections. The assessment records of other years are still available at Mumbai and are assessed at Mumbai. The AO, therefore, has no jurisdiction to assess the income of the assessee for one year when the remaining years are assessed at Mumbai. The learned CIT(A) was therefore not correct in holding that the AO had the jurisdiction to assess the income of the assessee and, therefore, notice issued under s. 148 by the AO is not valid notice. He places reliance on the decision of Hon'ble High Court of Kerala in the case of P.A. Ahammed vs. Chief CIT (2006) 200 CTR (Ker) 378. 9.2. The learned Departmental Representative, on the other hand banks upon first appellate order on the issue. 9.3. After considering the arguments advanced by the parties in view of the orders of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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