Ita/198/2001 Of The Commissioner Of Incometax, Kochi v. M/S.chackolas Spinning & Weaving Mills

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 6TH FEBRUARY 2008 / 17TH MAGHA 1929 ITA.No. 198 of 2001() --------------------- ITA.394/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.P.K.R.MENON(SR.),SC FOR IT RESPONDENTS: ------------- M/S. CHACKOLAS SPINNING AND WEAVING MILLS, KALAMASSERY. BY THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR &T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 198 OF 2001 -------------------------------------------- Dated this the 6th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. Heard senior counsel appearing for the appellant. This appeal isagainst the Tribunal's order confirming CIT (Appeals) order grantingreduction of Rs. 15,26,180/- towards interest claimed by the assesseefor the assessment year 1989-90. The assessee, a textile mill, duringthe relevant previous year diversified its activities to business in realestate. Land at high cost was acquired for the purpose of business inreal estate. Even though sale deed was not executed, more than 80% ofthe sale price was paid for the property and possession was also takenover by the assessee. Since sale deed could not be executed inaccordance with schedule under the agreement for sale, time wasgranted by the sellers on condition of payment of interest. Thededuction claim by the assessee is interest for belated payment of saleconsideration. Even though purchase of property is from the directors of the company, department has no case that the transaction is not bonafide or for any ulterior purpose. The Tribunal also noticed onreference to the Balance Sheet that the assets are current assets acquiredfor the purpose of business in real estate. Even though sale deed is notexecuted, possession is transferred to the company as envisaged underSection 2(47)(v) of the I.T. Act. In view of the finding of fact by theTribunal that possession was taken by the assessee-company andsubstantial amount was paid towards sale consideration and the balanceis only execution of sale deed, interest paid on the borrowed capital foracquisition of current asset for business purpose is an allowablededuction and the Tribunal rightly held so. We find no substantialquestion of law arising from the order of the Tribunal warrantinginterference in appeal. Appeal is accordingly dismissed. (C.N.RAMACHANDRAN NAIR)Judge.Judge. (T.R.RAMACHANDRAN NAIR) Judge.