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TMI Blog2007 (8) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... on film business is entitled to claim deduction under section 36(1)(iii) of the Act in respect of interest of Rs. 21,74,234 on amount borrowed from Corporation Bank to purchase shares of Shaw Wallace and Company Limited on behalf of itself and other firm ? 2. Whether the assessee and its beneficiaries who borrowed a sum of Rs. 3,80,00,000 and transferred the same to M/s. Gayathri Holding Private Limited who in turn advanced this amount to G. Venkateshwaran to purchase shares on his behalf and on behalf of M/s. Sujatha Films Limited, Sujatha Productions Private Limiited, Aruna International Private Limited and Sujatha Estate (Private) limited, from Shaw Wallace and Company Limited is nothing but a colourable device adopted to seek benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed a sum of Rs. 13,26,062 on pro rata basis. Being aggrieved by the same, the respondent-assessee filed first appeal. The first appellate authority confirmed the assessment order. Against that, the assessee filed second appeal before the Income-tax Appellate Tribunal. The Tribunal, applying the three conditions laid down in the case of Madhav Prasad Jatia v. CIT reported in [1979] 118 ITR 200 (SC), held that the assessee has fulfilled all the three conditions and therefore it is entitled to claim deduction of interest paid out of the income derived. The Revenue is aggrieved by the same and filed this appeal. 5 Sri M. V. Seshachala, learned counsel for the Revenue, submitted that the impugned order is not only erroneous but error in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim made for deduction towards interest. To know whether the assessee is entitled to or not for the deduction claimed by it, the relevant portion of section 36(1)(iii) of the Act are extracted hereunder "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—. . . . (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not) ; for any period beginning from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the borrowed amount for acquisition of assets shall not be given deduction till such asset is put to use. Since there is no full acquisition of shares, the Assessing Officer has rightly disallowed the claim on pro rata basis and the first appellate authority rightly con firmed the same. The Tribunal committed an error not applying its mind to these aspects of the matter. The Tribunal wrongly applied the decisions in the case of CIT v. Associated Fibre and Rubber Industries P. Ltd. reported in [1999] 236 ITR 471 (SC) and the conditions mentioned in Madhav Prasad Jatia's case [1979] 118 ITR 200 (SC) referred to supra. 10. The loan borrowed by the assessee was for the purpose of acquisition of shares. That has not materialised. Unless asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... times called colourable exercise or fraud on power and often times overlaps motives, passions and satisfactions is the attainment of ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal. If the use of the power is for the fulfilment of a legitimate object the actuation or catalysation by malice is not legicidal. The action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested, the court calls it a colourable exercise and is undec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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