Madhya Pradesh H.C : The sums received from the directors and shareholders of the assessee did not amount to `deposits’ within the meaning of s. 40A(8) of the Act and that no disallowance of interest under s. 40A(8) of the Act was called for

High Court Of Madhya Pradesh : Indore Bench

CIT vs. Kalani Asbestos Cement (P) Ltd.

Section 256(2)

Asst. Year 1980-81, 1981-82, 1982-83, 1983-84

G.G. Sohani, Actg. C.J. & K.M. Agrawal, J.

Misc. Civil Case No. 141 of 1986

22nd September, 1988

Counsel Appeared

Mukati, for the Revenue : S.C. Bagdia, for the Assessee

G. SOHANI, ACTG. C, J. :

The order in this case will also govern the disposal of Miscellaneous Civil Cases Nos. 142 of 1986 and 144 of 1986. These are applications under s. 256(2) of the IT Act, 1961 (hereinafter referred to as “the Act”).

2. The material facts giving rise to these applications, briefly, are as follows : For the asst. yrs. 1980-81 to 1983- 84, the ITO disallowed under s. 40A(8) of the Act, interest paid by the assessee to certain parties. On appeal, the CIT upheld the order passed by the ITO disallowing payment of interest to some persons. On further appeal, the Tribunal held that no disallowance of interest under s. 40A(8) of the Act was called for. Aggrieved by the order passed by the Tribunal, the Revenue sought reference, but as the application made by the Revenue in that behalf was rejected, the Revenue has filed this application.

3. Having heard learned counsel for the parties, we have come to the conclusion that the following question of law does arise out of the order passed by the Tribunal :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sums received from the directors and shareholders of the assessee did not amount to `deposits’ within the meaning of s. 40A(8) of the Act and that no disallowance of interest under s. 40A(8) of the Act was called for ?”

4. Accordingly, the applications are allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this Court for its opinion. In the circumstances of the case, parties shall bear their own costs of this reference.

[Citation : 176 ITR 346]

Malcare WordPress Security