TMI Blog2009 (7) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... , Adv., for the Appellant. Mr. D. K. Shome, Sr. Adv., Md. Nizamuddin, Adv., for the Respondent. JUDGMENT The judgment of the court was delivered by PINAKI CHANDRA GHOSE, J. - This appeal was admitted in terms of the following questions : 1) Whether the Tribunal misdirected itself in law in holding that the transactions relating to shares in Hindusthan Aluminium Company Limited were not covered by proviso (b) to section 43(5) or that the same were speculative transactions or the loss of Rs.2,67,782/-incurred therein was speculative loss and not hedging loss or that the assessee had not explained any aspect of the said transactions and its purported findings in this behalf are based on any material and/or have been arrived at by ignoring the relevant materials and/or by taking into consideration irrelevant and/or extraneous materials and/or are otherwise arbitrary, unreasonable and perverse ? 2) Whether the Tribunal misdirected itself in law in holding that the assessee was not carrying on money lending business in a general manner for earning interest or that it granted accommodation loans to sister concerns only or that the loans to sister concerns were grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof by the assessee as had been held by the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Kerala Vs. Joseph John reported in (1968) (67 ITR 74). The C.I.T. (Appeal) also relied on a judgment of the Madras High Court in the case of SK. AR. K. AR. Somasunderam Chettiar Co., reported in (1975) 101 ITR 832 and held that the assessee could not get the benefit of the Proviso to Section 43(5). Being aggrieved, appeal was filed before the Tribunal and the Tribunal came to the conclusion that the benefit of clause (b) of the proviso to Section 43(5), the onus would lie strongly on the assessee itself to prove that the contracts under consideration were of the nature so as to guard against loss in the holdings of the stocks and shares of the assessee through price fluctuation and the Tribunal held that the assessee has not at all clarified as to what led it to hold that there would be a probable loss in its holdings of shares of M/s. Hindusthan Aluminium Company Ltd. through the price fluctuations and came to the conclusion that the assessee has failed to explain as to whether and in what circumstances the purchases and sales were made and thus came to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h money lending business and such loan was granted with an intention to pull up their sister concerns from their dire financial condition. It has also been noted by the Assessing Officer that no steps or efforts have been made by the asessee company to recover these loans from the debtor-companies and furthermore, the assessee could not produce any money lending licence and held against the assesse after relying on the decision reported at 112 ITR 895 and 155 ITR 605 and disallowed the claim of the assessee before the C.I.T. (Appeal). The C.I.T. (Appeal) accepted the contention of the assessee on the ground that the activities of the company during the period covered by assessment years 1981-82 to 1988-89 be examined. It would be found that the assessee was having money lending as one of its ordinary business activities during all these year and thus, the C.I.T. (Appeal) allowed the claim towards bad debts. The learned Tribunal after analyzing the facts found that the main evidence of carrying on a money lending business would be that the assessee was giving loans to different parties at different points of time solely for the purpose of earning interest thereon. But in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact based on proper evidence and the High Court acted beyond its jurisdiction in interpreting with that finding. In our opinion, the argument put forward on behalf of the appellant is well-founded and must be accepted as correct. Upon examination of the order of the Appellate Tribunal we are satisfied that the majority of the Appellate Tribunal entertained no misapprehension with regard to the scope of the assessee's business and the High Court had no justification for saying that the Tribunal's conclusion was based upon any such misapprehension. It is manifest that the finding of the Appellate Tribunal that the transactions were speculative transactions and not hedging transactions is essentially a finding on a question of fact and it is not open to the High Court to interfere with that finding unless there is no evidence to support that finding or it is perverse". ii) In Commissioner of Income Tax Vs. Gillanders Arbuthnot and Co. Ltd. reported in Vol. 195 I.T.R. page 332, where the Court held as follows : "That because of certain difficulties, the assessee could not directly advance the loan to the company managed by it. It advanced the sum to its 100 per cent subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10(2)(v) of the Act". vi) Vol. 625 in the case of Essen Private Ltd. Vs. Commissioner of Income Tax, Madras , wherein the Court held as follows : "In our opinion, the High Court was not justified in criticizing the finding of the Tribunal as hazy and indecisive and thereafter upsetting the findings of fact recorded by the Tribunal. We consider that the High Court was in error in disregarding the findings of fact which the Appellate Tribunal has recorded. As we have already indicated, there was proper material before the Appellate Tribunal in support of its finding that the debt in question was incurred in the course of the business of the appellate-company so as to make it deductible under section 10(2)(xi) of the Income Tax Act. The Appellate Tribunal has found in this case that it was part of the managing agency business to provide funds to the managed company and there was no justification for the High Court to disregard the finding of the Tribunal on this aspect of the case. Reference has also been made to sub-clause (19) of clause 13 of the memorandum of association which clearly indicates that the moneys advanced by the appellant-company and the guarantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Senior Advocate appearing on behalf of the respondent pointed out that in the said decisions it would be evident from the facts that various entries were made in the books of accounts in the assessee in support of such hedging transactions. Therefore, it cannot be doubted that the assessee had a hedging transactions. Mr. Shome further submitted that the said facts are only on the basis of the case and further he pointed out that all the three authorities after dealing with the said facts came to the same conclusion on the basis of such concurrent findings. Therefore, he submitted that all the authorities' findings are same on the basis of concurrent findings. He further pointed out that so far the question of bad debts are in question he also relied upon the same facts and submitted that the Court should not apprise the evidence at this stage and the findings of facts are concurrent and all the authorities decided the questions on the same facts and came to the same conclusion. Therefore, he submitted that in respect of question Nos. 1 and 2, there is no point of law is involved since it is nothing but question of facts are the basis to deal with these questions. So f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department and in the negative. So far the question No. 2 is concerned, we have also found that the claim of the assessee towards bad debt of Rs.22,75,000/- the amounts were lent and advanced to its sister concerns and further on the facts it appears that the loans were unsecured and there is no evidence on record in favour of the assessee to show that the assessee was carrying on money lending business and further no efforts had been taken by the assessee to recover those loans from the sister concerns. We have also found out from the facts that it is nothing but a financing between the intra-group to secure the position of the sister concerns and further there is no material to show that the assessee was carrying on money lending business in a general manner and therefore, after considering into these facts we come to the conclusion and affirm the order of the Tribunal holding that the conditions relating to claim of bad debts by the assessee could not be satisfied in the given facts of this case and we affirm the order passed by the learned Tribunal and, accordingly, we answer the question No. 2 in negative and in favour of the department. Similarly, the answer to question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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