TMI Blog2007 (8) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and setting aside the order passed by the first appellate authority by framing the following substantial questions of law and urging various grounds in support of the same which reads as follows: "1. Whether the assessee who is carrying 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchase of shares of Shaw Wallace and Company. As on March 31, 1980, the said group of companies transferred shares worth Rs. 1,48,23,915 to GHPL and the balance amount of Rs. 2,31,76,085 was due to it. The assessing authority by its order dated August 11, 1992, out of Rs. 21,74,234 claimed as deduction towards interest paid on the loan borrowed under section 36(1) (iii) of the Income-tax Act, disallowed 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he has requested that if this court comes to the conclusion that the impugned order of the Tribunal is not correct, to remand the matter to the assessing authority or the deduction allowed by the assessing authority need not be disturbed. 7 We have carefully examined the rival legal contentions urged by learned counsel on behalf of the parties keeping in view section 36(1) (iii) of the Act and the nature of the 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 therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, if any, will be accounted for a settlement of the above transaction. It also includes Rs. 1,000 payable to a director of the company towards remuneration." 9 Firstly, the words "equity shares to be issued in future" is indicative of the fact that there is no immediate acquisition of shares of Shaw Wallace. Secondly, as already noticed, as per the proviso to section 36(1)(iii) of the Act, the amount of interest paid on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of State of Punjab v. Gurdial Singh, AIR 1980 SC 319. In that decision, the observations made at paragraph 9 in Benjamin's case are extracted, which are as under (page 321) "9. The question then, is what is mala fides in the jurisprudence of power ? Legal malice is gibberish unless juristic clarity keeps it separate from the popular concept of personal vice. Pithily put, bad faith which invalidates the exercise of power sometimes 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in this case and accepting the submissions made by learned counsel for the Revenue and rejecting the submissions of learned counsel for the assessee, we answer the questions in favour of the Revenue and against the assessee. We also hold that the decisions relied upon in support of the claim of the assessee are not applicable to the facts of the case. 14. The appeal is allowed and the order of the Tribunal is set aside. 15. In the circumstances of the case, there is no need to consider the alternative prayer made by learned counsel for the respondent-assessee, as we are not disturbing the same. 16. The Registry is directed to send a copy of this order to the Commissioner of Income-tax and also the Tribunal for rectification of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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