Bombay H.C : interest earned on fund borrowed for business is business income

High Court Of Bombay

CIT Vs. Varun Shipping Co. Ltd.

Section : 28(i),56

Dr. S. Radhakrishnan And S.J. Kathawalla, JJ.

IT Appeal No. 1040 Of 2008

September 22, 2008

JUDGMENT

1. Heard the learned counsel for the appellant and the learned counsel for the respondent.

2. The above appeal has been filed with regard to the following questions of law :

“(a) The substantial question of law which arises in the present appeal is regarding the true scope and correct interpretation of section 32 and other provisions of the Income-tax Act, 1961 and whether on the facts and circumstances of the case and in law, the hon’ble Tribunal was right in allowing the assessee’s claim of depreciation of Rs. 7,96,433 on furniture acquired from M/s Khatau Junkar Ltd. ?

(b) The second substantial question of law which arises in the present appeal is whether on the facts and circumstances of the case and in law, the hon’ble Tribunal was right in directing the Assessing Officer to treat the interest income of Rs. 45,59,163 as business income whereas the Assessing Officer treated the same as income from other sources for reasons recorded in the assessment order ?

(c) The third substantial question of law which arises in the present appeal is regarding the true scope and correct interpretation of section 10(33) and other provisions of the Income-tax Act, 1961 and whether, on the facts and circumstances of the case and in law, the hon’ble Tribunal was right in allowing the interest of Rs. 42,01,800 being the interest attributable to earning of dividend income, which was disallowed by the Assessing Officer ?

(d ) The fourth substantial question of law which arises in the present appeal is regarding the true scope and correct interpretation of section 115JA(2) and other provisions of the Income-tax Act, 1961 and whether on the facts and circumstances of the case, and in law, the hon’ble Tribunal was right in holding that while computing the book profit of the assessee-company, the net profit need not be enhanced by the amount of interest and other expenses as it had already been held that no expenditure was attributable to earning of dividend income exempt under section 10(33) ?”

3. As far as question (a) is concerned, Mr. Asokan does not dispute that the respondent is entitled to claim depreciation under section 32 with regard to furniture acquired. However, the dispute is with regard to valuation of the said furniture at Rs. 7,96,433. If that be so, the same cannot be a question of law.

4. As far as the second question is concerned, the Tribunal in its order dated December 27, 2007 in paragraphs 18 and 20 has clearly given a finding that the borrowing made by the appellant were very much part and parcel of the assessee’s investment in acquiring the ship. Even the R.B.I.’s permission was obtained for the same and interest was acquired with regard to the unutilised portion of the said borrowing. In view thereof, the Tribunal has clearly given a finding of fact that the aforesaid income by way of interest was for business purpose and in view of the said finding of fact there was no question of law involved in the above appeal.

5. As far as the third question is concerned in paragraph 21 of the order the Tribunal has clearly said that the said claim has been covered in view of the judgment of the hon’ble Supreme Court in the case of CIT v.  Kwality Biscuits Ltd. [2006] 284 ITR 434.

6. As far as question (d) is concerned it is a consequential question arising out of question (c) mentioned hereinabove. In view thereof there is no justification in the questions of law involved in the above appeal. The appeal stands dismissed.

[Citation : 334 ITR 263]