TMI Blog2009 (9) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... or opinion of this court at the instance of the Revenue by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh arising out of its order dated November 19, 1995, in cross-appeals in I. T. A. Nos. 70 and 93 of 1990 relating to assessment year 1986-87 : "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing interest claimed by the assessee at a higher rate on the borrowings though the investment had been made by the assessee in the shares of a sister concern which gave a fixed return of income ?" 2. The assessee borrowed money from a sister concern and paid interest therein at 18 per cent. per annum and purchased shares from the sister concern which carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... colourable dubious device to reduce the tax liability, such device is not permis-sible in view of the hon'ble Supreme Court's decision in the case of McDowell and Co. Ltd. v. CTO reported in [1985] 154 ITR 148. Penalty proceedings under section 271(1)(c) are initiated for furnish-ing of in- accurate particulars of income." 3. The Commissioner of Income-tax (Appeals) upheld the finding of the Assessing Officer with the following observations : "7.3. I do not find any reason to give relief to the appellant on this account. Another ground that the appellant is entitled to 4 per cent. dividend on these shares that in case of Highway Cycle Ind. Ltd., Ludhiana, for assessment year 1986-87 the Assistant Commissioner of Income-tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee did borrow certain funds at a higher rate of interest and utilized them for investments in certain preference shares. The assessee could not be prevented from making investment in certain shares only on the ground that the return from shares was very low. We do not agree with the Revenue that the benefit accruing at 4 per cent. from preference shares was not sufficient so as to justify the borrowings at 18 per cent. It is to be noted that the assessee was not dealing in shares and investments had been made as incidental activity of the business. The learned counsel has argued that there was ultimately no effect on the revenue because the assessee as well as the other two parties involved belonged to the same group. Borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee from investment in shares of the sister concern could at best be ground for partial relief to the assessee. 7. Learned counsel for the assessee at the outset submitted that the Tri-bunal followed its order in the case of Pankaj Munjal Family Trust and the question arising therefrom was referred for opinion of this court, which has been decided on July 9, 2008 in favour of the assessee and against the Revenue in I. T. R. Nos. 87 to 91 of 1995 (CIT v. Pankaj Munjal Family Trust) [2010] 326 ITR 286 ). 8. Learned counsel for the Revenue, however, submitted that even though, in the case of Pankaj Munjal (supra), this court held that no substantial question of law arose and tax planning was the right of the assessee, the infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CTO [1985] 154 ITR 148 (SC), the above observations were sought to be disapproved but in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC), it was observed that the observations of Chinnapa Reddy J. were not supported by other members of the Bench and the principles in IRC v. Fishers Executors [1926] AC 395 and in IRC v. Duke of Westminster [1936] AC 1, on which the observations in A. Raman and Co. [1968] 67 ITR 11 (SC) and B. M. Kharwar [1969] 72 ITR 603 (SC) were based, still held the field. 13. We may proceed on the basis that tax planning is permissible even if it results in avoidance of tax as observed in Azad Bachao Andolan [2003] 263 ITR 706 (SC). The legitimacy of claim for deduction has still to be made out o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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