TMI Blog2008 (1) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) deleting the disallowance of interest which was made by the Assessing Officer under section 36(1)(iii) on the ground that the purchase of shares was mainly for acquiring controlling rights in another company ?" 3. The Tribunal has considered the issue raised in the question as under : "5. The brief facts of the case are that the impugned sum stood dis- allowed out of the assessee's claim of interest at a total amount of Rs.789.58 lakhs, on account of utilization of borrowed capital for investment in the shares in Nachmo Knitex Ltd. and Ashima Syntex Ltd., as well as in the partly convertible debentures of three other companies, who, it was cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en carrying on the business of sale/purchase of shares, then the facts and circumstances of the case will be the same as in the case of Akalu Holdings, and assessee's case will be covered in favour of the assessee and against the Revenue by the decision of the Tribunal in the case of Akalu Holdings Pvt. Ltd. and Ataku Holdings P. Ltd. (supra). To find the answer to this question, the assessee was required to place copies of the memorandum of association and articles of association on record which was submitted at the Bench itself and has been considered. 10.1 From the copy of the memorandum of association and articles of association of Amola Holdings Pvt. Ltd. the assessee; it is noticed that first of the main object of the company to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant to the assessment year 1996-97 worth Rs. 5,36,53,000. (iii) Purchased 20,000 fully paid up equity shares of Nachmo Knitex Ltd. from open market during the period relevant to the assessment year 1996-97 for Rs. 10,67,025. (iv) Sold 800 equity shares of Nahmo Knitex Ltd. in open market through broker in May, 1996, i.e., relevant to the assessment year 1997-98 for Rs. 4,15,200. 11.2 In view of above facts and circumstances, we are of the opinion that objection raised by the learned Departmental represent- ative that facts of the present assessee were different from the facts and circumstances in the case of Akalu Holdings (P) Ltd., because the present assessee was not carrying on the business of sale/purchase of shares and sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the utilization of borrowings by the assessee for non-business purpose. 12. In view of the above facts and circumstances that the decision of the hon'ble Gujarat High Court in the case of Sarabhai Sons P. Ltd. v. CIT [1993] 201 ITR 464 wherein the hon'ble High Court has held that when the shares which are acquired not for the purpose of earn- ing the income, but only with the purpose of acquiring the controlling rights over another company, the interest on the borrowed funds can- not be treated as per the business purpose of the assessee-company and was not allowable and relied upon by the Assessing Officer, is not applicable to the present case, because of distinguishable facts and circumstances. 12.1 In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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