TMI Blog1996 (7) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 while computing the income under the head ' Other sources '. The appeal arises this way. The ITO found from the accounts of the company that though the assessee had claimed a huge sum as interest in the profit and loss account and the accounts also showed that some interest receipt from investments made by the company, there were certain investments in the shares of the group companies which did not yield any income during the relevant accounting year. He further found that the total amount invested in the shares of such companies which he characterised as ' group companies ' and which amounted to 19 in number, was Rs. 37.40 lakhs. No dividend has been received by the assessee from these shares. The ITO on these facts was of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim. The first is that the shares were acquired in order to have a controlling interest over those companies. There is no factual basis, so far as we can see, for this finding but even assuming for the sake of argument that the shares were so acquired that would only show the motive of the assessee, as contrasted with its intention, which is to earn dividend income. While considering the applicability of the provisions in the Income-tax Act permitting deductions in respect of expenditure incurred by the assessee, whether the provisions related to the computation of business income or the income from other sources, the motive of the assessee has never been held to be a relevant consideration. Changla, C.J. considered the motive of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ulterior motive or ultimate object in purchasing the shares. But the purpose of the purchase is a different matter." This decision was approvingly cited by the Supreme Court in the case of Seth R. Dalmia v. CIT [1977] 110 ITR 644 (see page 652). The Supreme Court again brought out the distinction between the motive and the purpose of the expenditure with reference to section 10(2)(xv) of the old Act in the case of Sassoon J. David Co. (P.) Ltd v. CIT [1979] 118 ITR 261/1 Taxman 485. The distinction has been brought out at page 273. The distinction between the motive and purpose has been brought out by the Calcutta High Court in the case of British Electrical Pumps (P.) Ltd v. CIT [1977] 106 ITR 620. At page 624 of the report it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o those before us. This decision has been approved by the Supreme Court. We follow the said decision with respect and draw similar distinction between motive and purpose and hold that in the instant case, though the ultimate or ulterior motive of the assessee might have been to confer controlling interest either to itself or to the Kanorias, yet the immediate purpose for acquisition of the shares was to earn income from the dividends thereof. We add that even if the motive of the assessee might have been to obtain control of another company, the consequent purchase of shares may still be treated as investment and the concurrent purpose of the assessee could well have been that of earning further income by acquiring the control of the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 57(iii) was that the same should have been incurred for the purpose of earning the income and the fact that the purpose did not fructify during the relevant accounting year is no consideration for the allowability of the interest. Respectfully following the judgment, which is the law of the land, we hold that the assessee is entitled to the interest of Rs. 6,74,280 as a deduction under section 57(iii) of the Act while computing the income from other sources and that the departmental authorities were not justified in disallowing the same. 7. Dr. Pal for the assessee also addressed arguments on the assumption that even if the claim is considered with reference to section 36(1)(iii), as was done erroneously by the income-tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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