Ita/438/2006 Of (O&M) Satish Bala Malhotra v. Commr. Of Income Tax Jalandhar

I N THE HI GH COURT OF PUNJAB AND HARYANA AT CHANDI GARH I NCOME TAX APPEAL No. 438 of 2006 ( O&M)DATE OF DECI SI ON: 03. 10. 2016 Smt . Sat i sh Bal a Mal hot r a ver sus …. . Appel l ant Commi ssi oner of I ncome Tax, Jal andhar . . . . . Respondent CORAM: -HON’ BLE MR. JUSTI CE S. J. VAZI FDAR, CHI EF JUSTI CEHON’ BLE MR. JUSTI CE DEEPAK SI BALHON’ BLE MR. JUSTI CE DEEPAK SI BAL Pr esent :Mr . Pankaj Jai n, Seni or Advocat e wi t hMr . Di vya Sur i , Advocat e and Mr . Sachi n Bhar dwaj , Advocat e f or t he appel l ant Mr . Vi vek Set hi , Advocat e f or t he r espondent. . S. J. VAZI FDAR, CHI EF JUSTI CE: Thi s i s an appeal agai nst t he or der of t he Tr i bunalconf i r mi ng t he or der of t he Commi ssi oner of I ncome Tax( Appeal s) enhanci ng t heappel l ant / assessee’ s i ncome. Theappeal per t ai ns t o t he Assessment Year 1997- 98. The Assessi ngOf f i cer had di sal l owed i nt er est of Rs. 9, 45, 675/ - out of t het ot al cl ai m of i nt er est of Rs. 18, 91, 335/ - . 2.By an or der dat ed 29. 10. 2007, t he appeal wasadmi t t ed on t he f ol l owi ng subst ant i al quest i ons of l aw: - “ i .Whet her under t he f act s and ci r cumst ances oft he case t he i nt er est on money bor r owed f ori nvest ment i n shar es i n M/ s M. Gul ab Si ngh &Sons ( P) Lt d. whi ch had not yi el ded anydi vi dend i s admi ssi bl e deduct i on? i i .Whet her under t he f act s and ci r cumst ances oft he case, Tr i bunal i s j ust i f i ed t hat t heshar es have been pur chased by appel l ant t oacqui r e cont r ol l i ng i nt er est and hence notal l owabl e deduct i on?” 3.The assessee had cl ai med a deduct i on ofRs. 18, 91, 335/ - on account of i nt er est pai d t o t he Ashok KumarMal hot r a HUF.Ashok Kumar Mal hot r a i s t he assessee’ s husbandand t he assessee i s a member of t he sai d HUF. The assesseecl ai med t hat she had bor r owed f unds f r om t he HUF dur i ng t heAssessment Year 1987- 88 t o pur chase shar es ofM/ sM.Gul abSi ngh & Sons Pvt . Lt d. ( her eaf t er r ef er r ed t o as t he“ Company” ) and M/ s M. B. D. Ent er pr i ses Pvt . Lt d.The Assessi ngOf f i cer asked t he assessee t o f ur ni sh det ai l s oft hei nvest ment out of t he bor r owed f unds.As t he assessee di d notf ur ni sh t he det ai l s, t he Assessi ng Of f i cer assumed t hat out oft he bor r owed f unds i nvest ment t o t he ext ent of 50 per cent hadbeen made f or t he pur chase of t he shar es i n t hese compani es.He accor di ngl y di sal l owed 50 per cent of t he i nt er estamount i ng t o Rs. 9, 45, 660/ - out of t he t ot al i nt er est cl ai med.4.The CI T( A) obser ved t hat t he ent i r e bor r owed f undsof Rs. 18, 91, 355/ - had been used by t he assessee f or acqui r i ngshar es of t he company M/ s M. Gul ab Si ngh & Sons Pvt . Lt d. andno par t t her eof was ut i l i sed f or pur chasi ng shar es of M/ sM. B. D. Ent er pr i ses Pvt . Lt d. Havi ng hel d t hat t he shar es wer epur chased t o acqui r e cont r ol of t he company and not as ani nvest ment , t he CI T ( A) di sal l owed t he ent i r e amount ofRs. 18, 91, 355/ - . The CI T ( A) accor di ngl y enhanced t he assessee’ s i ncome by Rs. 9, 45, 660/ - and or der ed i ni t i at i on ofpenal t ypr oceedi ngsunder Sect i on 271 ( 1) ( C) f or f ur ni shi ngi naccur at e par t i cul ar s of i ncome. 5.The Tr i bunal agr eed wi t h t he CI T ( A) t hat t he ent i r ef unds wer e ut i l i zed f or t he pur pose of pur chasi ng t he shar esoft he companyand conf i r med t he or der of t he CI T ( A)enhanci ng t he i ncome.The assessment or der and t he or der oft he CI T ( A) di d not f ur ni sh t he det ai l s of t he assessee’ shol di ng. The Tr i bunal ’ s or der , however , f ur ni shes t he det ai l sof t he assessee’ s hol di ngs. 6.The f act s necessar y f or t he det er mi nat i on of t hi sappeal ar e t hese: assessee’ s i ncome by Rs. 9, 45, 660/ - and or der ed i ni t i at i on ofpenal t ypr oceedi ngsunder Sect i on 271 ( 1) ( C) f or f ur ni shi ngi naccur at e par t i cul ar s of i ncome. 5.The Tr i bunal agr eed wi t h t he CI T ( A) t hat t he ent i r ef unds wer e ut i l i zed f or t he pur pose of pur chasi ng t he shar esoft he companyand conf i r med t he or der of t he CI T ( A)enhanci ng t he i ncome.The assessment or der and t he or der oft he CI T ( A) di d not f ur ni sh t he det ai l s of t he assessee’ shol di ng. The Tr i bunal ’ s or der , however , f ur ni shes t he det ai l sof t he assessee’ s hol di ngs. 6.The f act s necessar y f or t he det er mi nat i on of t hi sappeal ar e t hese: Ashok Kumar Mal hot r a HUF, Ashok Kumar Mal hot r a as ani ndi vi dual , M/ s M. B. D. Ent er pr i ses Pvt . Lt d. and t he assesseepur chased 2459, 1495, 945 and 1933 equi t y shar es i n t hecompany, r espect i vel y, aggr egat i ng t o 6832 shar es.The ent i r eshar e capi t al of t he company i s hel d by t hem.The assessee,t hus, pur chased 28. 29 per cent of t he equi t y shar es oft hecompany.She i s t he wi f e of Ashok Kumar Mal hot r a and a memberof hi s HUF as al so a shar e- hol der and a Di r ect or i n M/ s M. B. D.Ent er pr i ses Pvt . Lt d. She bor r owed money f r om t he Ashok KumarMal hot r a HUF f or t he pur chase of t hese shar es on i nt er est .For t he assessment year i n quest i on, she pai d i nt er est ofRs. 18, 91, 355/ - i n r espect of whi ch she cl ai med adeduct i onunder Sect i on 57 ( i i i ) . 7.Sect i on 57 ( i i i ) , as i t t hen st ood, r ead as under : - “ 57.The i ncome char geabl e under t he head “ I ncome f r omot her sour ces” shal l be comput ed af t er maki ng t hef ol l owi ng deduct i ons, namel y: -ot her sour ces” shal l be comput ed af t er maki ng t hef ol l owi ng deduct i ons, namel y: - …. …. . ……. ……. ……. ( i i i ) any ot her expendi t ur e ( not bei ng i n t he nat ur e ofcapi t al expendi t ur e) l ai d out or expended whol l y andexcl usi vel y f or t he pur pose of maki ng or ear ni ngsuch i ncome; ”capi t al expendi t ur e) l ai d out or expended whol l y andexcl usi vel y f or t he pur pose of maki ng or ear ni ngsuch i ncome; ” :Re: Quest i on ( i ) 8.The Tr i bunal f i r st l y hel d t hat t he assessee had notcl ar i f i ed t hat she had been i n t he busi ness of deal i ng i nshar es and t hat unl ess t he assessee pr oved t hat she had beendeal i ng i n shar es as a busi ness i t was di f f i cul t t o accept t hecont ent i on t hat she pur chased t he shar es f or t he pur pose ofmaki ng or ear ni ng i ncome. …. …. . ……. ……. ……. ( i i i ) any ot her expendi t ur e ( not bei ng i n t he nat ur e ofcapi t al expendi t ur e) l ai d out or expended whol l y andexcl usi vel y f or t he pur pose of maki ng or ear ni ngsuch i ncome; ”capi t al expendi t ur e) l ai d out or expended whol l y andexcl usi vel y f or t he pur pose of maki ng or ear ni ngsuch i ncome; ” :Re: Quest i on ( i ) 8.The Tr i bunal f i r st l y hel d t hat t he assessee had notcl ar i f i ed t hat she had been i n t he busi ness of deal i ng i nshar es and t hat unl ess t he assessee pr oved t hat she had beendeal i ng i n shar es as a busi ness i t was di f f i cul t t o accept t hecont ent i on t hat she pur chased t he shar es f or t he pur pose ofmaki ng or ear ni ng i ncome. 9.The assessee’ s i ncome char geabl e under t he head“ I ncome f r om ot her sour ces” i s t o be comput ed af t er maki ng t hededuct i ons ment i oned i n Sect i on 57 whi ch under sub- sect i on( i i i ) t her eof i ncl udes any ot her expendi t ur e not bei ng i n t henat ur e of capi t al expendi t ur e l ai d out or expended whol l y andexcl usi vel y f or t he pur pose of maki ng and ear ni ng such i ncome.The wor ds “ such i ncome” r ef er t o i ncome f r om ot her sour ces.The deduct i on under Sect i on 57 ( i i i ) i s not avai l abl e onl y t oper sons who deal i n shar es as a busi ness. Even ot her i nvest or sar e ent i t l ed t o t he benef i t of Sect i on 57. The obser vat i on,t hat unl ess and unt i lt he assessee pr oves t hat she has beendeal i ng i n shar es as a busi ness i t i s di f f i cul t t o accept t hecont ent i on t hat t he shar es pur chased by her ar e f or t hepur pose ofmaki ng and ear ni ng such i ncome, i s not wel l -f ounded. Ther e i s no pr esumpt i on t hat a per son not i nvol ved i nt he busi ness of deal i ng i n shar es pur chases t hem f or a pur poseot her t han maki ng or ear ni ng i ncome f r om such shar es. Ther e i scer t ai nl y no pr esumpt i on t hat such per sons pur chase shar es f ort he pur pose of gai ni ng cont r ol of t he company. I n f act , a l ar ge number of per sons pur chase shar es i n var i ous compani esf or t he pur pose of maki ng or ear ni ng i ncome t her ef r om t han f orpur pose of gai ni ng cont r ol of compani es. 10.That a company i n whi ch t he shar es ar e pur chaseddoes not decl ar e di vi dend even f or a f ew year s i s notdet er mi nat i ve of t he pur pose f or whi ch t he shar es ar epur chased. The r ecei pt of di vi dend i s not t he onl y cr i t er i a.What i s ent i t l ed t o be deduct ed i s t he expendi t ur e excl usi vel yf or t he pur pose of maki ng or ear ni ng such i ncome. I f anassessee est abl i shes t hat he has i ncur r ed expendi t ur e f or t hepur pose of maki ng or ear ni ng such i ncome, he i s ent i t l ed t ot he deduct i on under Sect i on 57( i i i ) . I t i s not necessar y t hatt he expendi t ur e l ai d out or expended act ual l y r esul t s i nmaki ng or ear ni ng such i ncome. Ther e ar e sever al compani eswhi ch do not decl ar e di vi dend i n cer t ai n year s. Ther e ar ecompani es whi ch do not decl ar e i ncome f or sever al year s andar e ul t i mat el y wound up. That does not mean t hat t heexpendi t ur e l ai d out or expended f or t he pur pose of pur chaseof i t s shar es was not whol l y or excl usi vel y f or t he pur pose ofmaki ng or ear ni ng i ncome t her ef r om. 11.Thi s poi nt st ands concl uded by sever al j udgment s oft he Supr eme Cour t and var i ous Hi gh Cour t s. I t i s suf f i ci entt o r ef er t o a j udgment of t he Supr eme Cour t under Sect i on12( 2) of t he I ncome Tax Act , 1922, whi ch i s si mi l ar t o Sect i on57 ( i i i ) of t he 1961 Act and a j udgment of t he Supr eme Cour tunder t he 1961 Act . I n East er n I nvest ment s Li mi t ed vs. Commi ssi oner ofI ncome Tax, [ 1951] 20 I TR 1( SC) , t he Supr eme Cour t hel d t hat 11.Thi s poi nt st ands concl uded by sever al j udgment s oft he Supr eme Cour t and var i ous Hi gh Cour t s. I t i s suf f i ci entt o r ef er t o a j udgment of t he Supr eme Cour t under Sect i on12( 2) of t he I ncome Tax Act , 1922, whi ch i s si mi l ar t o Sect i on57 ( i i i ) of t he 1961 Act and a j udgment of t he Supr eme Cour tunder t he 1961 Act . I n East er n I nvest ment s Li mi t ed vs. Commi ssi oner ofI ncome Tax, [ 1951] 20 I TR 1( SC) , t he Supr eme Cour t hel d t hat i t i s not necessar y t o show t hat t he expendi t ur e was apr of i t abl e one or i n f act any pr of i t was ear ned. I n Commi ssi onerof I ncome- Tax, West Bengal - I I I vs.Raj endr a Pr asad Moody, [ 1978] 115 I TR 519, t he Supr eme Cour thel d: - “ 3. What s. 57( i i i ) r equi r es i s t hat t he expendi t ur emust be l ai d out or expended whol l y and excl usi vel y f ort he pur pose of maki ng or ear ni ng i ncome. I ti s t hepur pose of t he expendi t ur e t hat i s r el evant i ndet er mi ni ng t he appl i cabi l i t y of s. 57( i i i ) and t hatpur pose must be maki ng or ear ni ng of i ncome. s. 57( i i i )does not r equi r e t hat t hi s pur pose must be f ul f i l l ed i nor der t o qual i f y t he expendi t ur e f or deduct i on. I t doesnot say t hat t he expendi t ur e shal l be deduct i bl e onl y i fany i ncome i s made or ear ned. Ther e i s i n f act not hi ngi n t he l anguage of s. 57( i i i ) t o suggest t hat t hepur pose f or whi ch t he expendi t ur e i s made shoul df r uct i f y i nt o any benef i t by way of r et ur n i n t he shapeof i ncome. The pl ai n nat ur al const r uct i on of t hel anguage of s. 57( i i i ) i r r esi st i bl y l eads t o t heconcl usi on t hat t o br i ng a case wi t hi n t he sect i on, i ti s not necessar y t hat any i ncome shoul d i n f act havebeen ear ned as a r esul t of t he expendi t ur e. I t may bepoi nt ed out t hat an i dent i cal vi ew was t aken by t hi sCour t i n East er n I nvest ment s Lt d. v.CI T [ 1951] 20 I TR1, 4 ( SC) , wher e i nt er pr et i ng t he cor r espondi ngpr ovi si on i n s. 12( 2) of t he I . T. Act , 1922 whi ch wasi psi ssi ma ver ba i n t he same t er ms as s. 57( i i i ) , BoseJ. , speaki ng on behal f of t he Cour t obser ved: “ I t i s not necessar y t o show t hat t he expendi t ur ewas a pr of i t abl e one or t hat i n f act any pr of i t wasear ned” . I t i s i ndeed di f f i cul t t o see how, af t er t hi sobser vat i on of t he Cour t , t her e can be any scope f orcont r over sy i n r egar d t o t he i nt er pr et at i on of s.57( i i i ) . ” 12.Thus, t he f act t hat no di vi dend i s decl ar ed does not by i t sel f i ndi cat e t hat t he expendi t ur e was not l ai d out orexpended f or t he pur pose of maki ng or ear ni ng i ncome. The f i r st quest i on of l aw i s, t her ef or e, answer ed i nf avour of t he appel l ant / assessee. :Re: Quest i on( i i ) 13.The obser vat i on i n Moody’ s case t hat Sect i on 12( 2)of t he 1922 Act i s i psi ssi ma ver ba t akes us t o t he next poi nt .I t was obser ved t hat t he cor r espondi ng pr ovi si on of Sect i on12( 2) of t he 1922 Act i s Sect i on 57( i i i ) of t he 1961 Act andt hat Sect i on 12 ( 2) was i psi ssi ma ver ba ( i n t he same t er ms) asSect i on 57( i i i ) . Sect i on 12( 2) of t he 1922 Act , i n so f ar asi t i s r el evant , r ead as under : - “ 12. Ot her sour ces. - …. …. . …. …. …. . … …. . …… . . …. . . …. . … …. . ….. . …. . . …. .…. . . …… ( 2) Such i ncome, pr of i t s and gai ns shal l be comput edaf t er maki ng al l owance f or any expendi t ur e ( not bei ng i n t henat ur e of capi t al expendi t ur e) i ncur r ed sol el y f or t hepur pose of maki ng or ear ni ng such i ncome, pr of i t s or gai ns. ” “ 12. Ot her sour ces. - …. …. . …. …. …. . … …. . …… . . …. . . …. . … …. . ….. . …. . . …. .…. . . …… ( 2) Such i ncome, pr of i t s and gai ns shal l be comput edaf t er maki ng al l owance f or any expendi t ur e ( not bei ng i n t henat ur e of capi t al expendi t ur e) i ncur r ed sol el y f or t hepur pose of maki ng or ear ni ng such i ncome, pr of i t s or gai ns. ” Sect i on 12( 2) used t he wor d “ sol el y” wher eas sect i on57( i i i ) uses t he wor ds “ whol l y and excl usi vel y” . I t seems t ous t hat t her e i s no qual i t at i ve di f f er ence on account of t heuse of t he wor ds “ whol l y and excl usi vel y” i n pl ace of t he wor d“ sol el y” . The Legi sl at ur e appear s mer el y t o have emphasi zedt he poi nt r at her t han expanded t he scope of t he sect i on. Thi si s cl ear f or mor e t han one r eason. 14.Fi r st l y, t he Supr eme Cour t i t sel f hel d i n Moody’ scase t hat sect i on 12( 2) i s i psi ssi ma ver ba as sect i on 57( i i i )of t he 1961 Act . The Lat i n expr essi on i psi ssi ma ver ba means“ t he ver y wor ds” . Al t hough t he ver y wor d “ sol el y” i s not usedi nsect i on 57( i i i ) whi ch uses t he wor ds“ whol l y andexcl usi vel y” , t he Supr eme Cour t consi der ed t he scope of t het wo sect i ons t o be t he same. 15.Secondl y, t heNot esonCl auseswi t h r espect t osect i on 57( i i i ) publ i shed on 24. 04. 1961 i n t he Gazet t e ofI ndi a ( Ext r aor di nar y) , Par t I I - Sect i on 2, page 243, st at es: - “ I t em ( i i i ) . - The expr essi on “ sol el y f or t hepur pose…. . ” occur r i ng i n t he exi st i ng sect i on has beensubst i t ut ed by t he wor ds “ whol l y, necessar i l y andexcl usi vel y f or t he pur pose…. . ” t o secur e uni f or mi t ywi t h t he l anguage adopt ed el sewher e i n t he Bi l l . ” The Not es on Cl auses do not i ndi cat e any qual i t at i vedi f f er ence on account of t he wor ds “ whol l y and excl usi vel y” i nsect i on 57( i i i ) of t he 1961 Act subst i t ut i ng t he wor d “ sol el y”i n sect i on 12( 2) of t he 1922 Act . The wor ds wer e used onl y t osecur e uni f or mi t y wi t h t he l anguage adopt ed el sewher e i n t heBi l l . 16.Thi r dl y, each of t hese wor ds -“ sol el y” ,“ whol l y”and “ excl usi vel y” ar e synonymous t o each ot her . Al most ever ydi ct i onar yand l aw l exi con suggest s t hi s. I n Cor pus Jur i sSecondum, Vol ume 33 Page 113, i t i s st at ed t hat t he t er m“ excl usi vel y” has been hel d equi val ent t o or synonymous wi t h“ sol el y” and “ whol l y” . Cor pus Jur i s Secondum, Vol ume 81 atpage 387 st at es t hat t he wor d “ sol el y” i s def i ned as meani ng“ excl usi vel y” and “ whol l y” . I t st at es t hat t he wor d “ sol el y”has been hel d equi val ent t o or synonymous wi t h “ excl usi vel y”and “ whol l y” . Cor pus Jur i s Secondum, Vol ume 94 at page 15st at es t hat t he wor d “ whol l y” has been hel d t o be equi val entt o or synonymous wi t h “ excl usi vel y” and “ sol el y” . 17.Thi s br i ngs us t o t he i nt er pr et at i on ofsect i on57( i i i ) i n so f ar as i t i s r el evant t o t hi s appeal .The mai nquest i on t hat cal l s f or consi der at i on i s whet her t he assesseeacqui r ed t hese shar es t o gai n cont r ol or whet her she acqui r ed t hem as an i nvest ment . The Tr i bunal uphel d t he f i ndi ng of t heAssessi ng Of f i cer and of t he CI T ( A) t hat t he assessee’ s r eali nt ent i on was t o hol d and acqui r e cont r ol over t he company- M/ sM. Gul ab Si ngh & Sons Pvt . Lt d. 17.Thi s br i ngs us t o t he i nt er pr et at i on ofsect i on57( i i i ) i n so f ar as i t i s r el evant t o t hi s appeal .The mai nquest i on t hat cal l s f or consi der at i on i s whet her t he assesseeacqui r ed t hese shar es t o gai n cont r ol or whet her she acqui r ed t hem as an i nvest ment . The Tr i bunal uphel d t he f i ndi ng of t heAssessi ng Of f i cer and of t he CI T ( A) t hat t he assessee’ s r eali nt ent i on was t o hol d and acqui r e cont r ol over t he company- M/ sM. Gul ab Si ngh & Sons Pvt . Lt d. 18.Deci ded cases have caut i oned agai nst mi st aki ng t hepur pose of expendi t ur e l ai d out or expended f or maki ng orear ni ng such i ncome wi t h t hemot i ve f or doi ng so. Thej udgment s have emphasi zed t he di f f er ence bet ween t he pur poseof t he expendi t ur e bei ng l ai d out or expended and t he mot i vef ort he expendi t ur e bei ng l ai d out and expended. I f t heexpendi t ur e i s l ai d or expended f or t he pur pose of maki ng orear ni ng such i ncome, t he assessee i s ent i t l ed t o t he benef i tof sect i on 57( i i i ) i r r espect i ve of t he mot i ve f or doi ng so. 19.I n Or mer ods ( I ndi a) Pr i vat e Lt d. vs. Commi ssi oner ofI ncome- Tax, Bombay Ci t y, [ 1959] 36 I TR 329 ( Bom) , t he assesseepur chased a bl ock of shar es i n Gannon Dunker l ey & Co. Lt d. f ora sum of Rs. 52. 25 l acs. Rs. 36 l acs was pai d f r om a l oangr ant ed by Li f e Assur ance Company Li mi t ed agai nst a pl edge oft hose shar es. The assessee al so i ncur r ed ot her debt s andobt ai ned ot her l oans aggr egat i ng t o Rs. 13. 50 l acs f or t hepur chase of t he shar es. The l oans wer e ut i l i zed f or payi ng t heconsi der at i on of t he shar er s. The assessee pai d i nt er est i nt he pr evi ous year aggr egat i ng t o about Rs. 3, 73, 000/ - . Ther ewas no i ncome f r om t hose shar es. The assessee cl ai med t o setof f t he payment of i nt er est agai nst i t s ot her i ncome. OneGupt a and one Mor ar ka cont r ol l ed t he assessee company and hadpur chased t hese shar es i n par t ner shi p. They t r ansf er r ed t heshar es t o t he assessee and t ook t he same back af t er some t i me. The I TO r ej ect ed t he cl ai m obser vi ng t hat t he i nvest ment wasnot f or a pr oper busi ness consi der at i on and was pur el y at r ansact i on i n whi ch t he company acqui esced i n t he per sonalf i nanci al t r ansact i ons of t he Gupt a and Mor ar ka f ami l i es. TheAppel l at e Assi st ant Commi ssi oner conf i r med t hi s vi ew. TheTr i bunal hel d t hat t he assessee had ser ved one pur pose andt hat was t he conveni ence of t he sai d Gupt a and Mor ar ka.Par agr aphs 5 and 11 of t he j udgment r ead as under : - “ 5. The quest i on whi ch we have t o det er mi ne ont hi s r ef er ence i s: “ Whet her on t he f act s and i n t he ci r cumst ancesof t he case i nt er est pai d on moneys bor r owedf or t he pur chase of shar es i n Gannon Dunker l ey& Co.Lt d. whi ch di d not yi el d any. di vi dendi ncome, coul d be set of f agai nst ot her i ncomeunder sect i on 24( 1) of t he I ncome- Tax Act ?” …. …. …. . … …. . …… . . …. . . …. . … …. . …. . . …. . . …. . …. . . …… “ 5. The quest i on whi ch we have t o det er mi ne ont hi s r ef er ence i s: “ Whet her on t he f act s and i n t he ci r cumst ancesof t he case i nt er est pai d on moneys bor r owedf or t he pur chase of shar es i n Gannon Dunker l ey& Co.Lt d. whi ch di d not yi el d any. di vi dendi ncome, coul d be set of f agai nst ot her i ncomeunder sect i on 24( 1) of t he I ncome- Tax Act ?” …. …. …. . … …. . …… . . …. . . …. . … …. . …. . . …. . . …. . …. . . …… 11. I t has been, st r enuousl y ur ged t hat t heTr i bunal has r ecor ded an expr ess and expl i ci tf i ndi ng t hat t he pur pose of t hese ‘ bor r owi ngs wasnot ear ni ng of any i ncome or pr of i t s or gai ns byt he assessee company but somet hi ng f r audul ent ,vi z. , t he conveni ence of t he i nt er est ed par t i eswhose names ar e ment i oned as Gupt a and Mor ar ka. Theshor t ar gument of Mr . Joshi i s t hat t her e i s acl ear l y r ecor ded f i ndi ng of f act as t o what t hepur pose of t hi s bor r owi ng was and i t i s sai d t hatt he onl y answer t hat can be gi ven on t he quest i onbef or e us must , t her ef or e, be agai nst t he assessee.We ar e unabl e t o acqui esce i n t hi s ar gument . I t i si ndubi t abl y t r ue t hat t he Tr i bunal has st at ed t hatt he pur chase of t hese shar es by t he company hasser ved t he pur pose of gi vi ng f aci l i t y orconveni ence t o t wo i nt er est ed par t i es. I t i sequal l y t r ue t hat t he Tr i bunal has used t he wor d“ pur pose” i n r ecor di ng t hi s f i ndi ng. Evi dent l yt her e i s her e t he use of an expr essi on whi ch hasmor e t han one meani ng. “ Pur pose” may, i n somecont ext , suggest obj ect , and pur pose may some t i messuggest mot i ve f or a t r ansact i on. But under sect i on12, we have t o r ead t he wor d “ pur pose” i n i t s l egalsense t o be gat her ed f r om t he cont ext i n whi ch i tappear s. We have t o f i nd out t he meani ng as f ar aspossi bl e f r om t he l anguage of t he sect i on i t sel fand wi t hout at t r i but i ng t o t he Legi sl at ur e apr eci se appr eci at i on of t he t echni cal appr opr i at eness of i t s own. But what ever Way wer ead t he wor d “ pur pose” i t cannot cer t ai nl y mean amot i ve f or a t r ansact i on. Much l ess can i t mean t heul t er i or mot i ve or t he ul t i mat e obj ect ofpur chasi ng t he shar es by t he company. The onl ypossi bl e way t o r ead what Mr . Joshi has descr i bedas t he expr ess and expl i ci t f i ndi ng of t he Tr i bunali s, i n our opi ni on, no mor e t han a f i ndi ng by t heTr i bunal as t o t he ul t er i or mot i ve or ul t i mat eobj ect i n pur chasi ng t i e shar es. But t he pur pose oft he pur chase i s a di f f er ent mat t er . Al l t hat t heTr i bunal has r ecor ded i s t hat t he shar es wer e notpur chased wi t h a vi ew t o t r adi ng i n t hem.I nci dent al l y, we may ment i on t hat t he I ncome- TaxOf f i cer had obser ved t hat t he i nvest ment s wer e notf or a pr oper busi ness consi der at i on nor f or any“ sound i nvest ment consi der at i on” . But we ar econcer ned wi t h t he f i ndi ng of t he Tr i bunal and notwhat t he I ncome- Tax Of f i cer may have sai d. Ther ei s, t her ef or e, i n our vi ew, no f i ndi ng by t heTr i bunal t hat t hese shar es wer e not pur chasedsol el y f or t he pur pose of maki ng or ear ni ng i ncome,pr of i t s Or gai ns. Now t he Tr i bunal has f ound t hatt hese pur chases wer e i nvest ment s of t he assesseecompany. On t he f act s of t he case and t he f i ndi ngr ecor ded by t he Tr i bunal t he onl y possi bl econcl usi on t hat we can r each i s t hat t hesei nvest ment s wer e made f or t he pur pose of ear ni ngi ncome or di vi dends or f or maki ng pr of i t s or gai ns.I n our opi ni on, t he Tr i bunal has mi xed up t heconcept of t he pur pose of t he pur chase of t heseshar es by t he company and what i n i t s j udgment wast he mot i ve f or t he pur chase of t he shar es. I tf ol l ows f r om t he or der of t he Tr i bunal , par t ofwhi ch we have al r eady set out , t hat t he Tr i bunalt ook t he vi ew t hat t he assessee was ent i t l ed i nr espect of t he t hr ee subsequent year s t o set of ft he payment of i nt er est on t he l oans agai nst t hedi vi dend i ncome. That t he pur chase of t he shar eswas t o ear n i ncome woul d seem t o be t he ver y basi sof t hat par t of t he or der made by t he Tr i bunal . I nour j udgment , wher e t he Tr i bunal has gone wr ong i st hat i t has, whi l e appr eci at i ng t he nat ur e of t hepur chase of t he shar es by t he assessee company,gi ven over r i di ng ef f ect t o what i t concl uded wast he mot i ve f or t he pur chase of t he shar es. Themot i ve f or t he pur chase of t he shar es and t hepur pose f or pur chase of t he same shoul d not havebeen al l owed t o be mi xed up i n t hat manner . ” 20.I n Set h R. Dal mi a vs. The Commi ssi oner of I ncomeTax, Del hi , New Del hi , ( 1977) 4 Supr eme Cour t Cases 329, t heSupr eme Cour tr ef er r ed t o t he j udgment of t he Bombay Hi ghCour t i n Or mer ods ( I ndi a) Pr i vat e Lt d. vs. Commi ssi oner ofI ncome- Tax, Bombay Ci t y, [ 1959] 36 I TR 329 ( Bom) and C. I . T.vs. Vi j aykuver ba Saheb of Mor vi ,[ 1975] 100 I TR 67 ( Bom) . I nt hat case al so, t he Supr eme Cour t deal t wi t h Sect i on 12( 2) oft he 1922 Act . I n par agr aph 8, t he Supr eme Cour t obser ved: - 20.I n Set h R. Dal mi a vs. The Commi ssi oner of I ncomeTax, Del hi , New Del hi , ( 1977) 4 Supr eme Cour t Cases 329, t heSupr eme Cour tr ef er r ed t o t he j udgment of t he Bombay Hi ghCour t i n Or mer ods ( I ndi a) Pr i vat e Lt d. vs. Commi ssi oner ofI ncome- Tax, Bombay Ci t y, [ 1959] 36 I TR 329 ( Bom) and C. I . T.vs. Vi j aykuver ba Saheb of Mor vi ,[ 1975] 100 I TR 67 ( Bom) . I nt hat case al so, t he Supr eme Cour t deal t wi t h Sect i on 12( 2) oft he 1922 Act . I n par agr aph 8, t he Supr eme Cour t obser ved: - “ Apar t f r om t hese deci si ons of t hi s Cour t , anumber of deci si ons of t he Hi gh Cour t s have al sot aken t he same vi ew. I n Or mer ods ( I ndi a) Pr i vat eLt d. vs. Commi ssi onerof I ncome- t ax, Bombay Ci t y,36 I TR 329 ( Bom HC) , t he Bombay Hi gh Cour t al l owedcer t ai n sums of money pai d as i nt er est on bor r owedcapi t al f or t he pur chase of shar es and hel d t hatt he wor d “ pur pose” i n t he expr essi on “ expendi t ur ei ncur r ed sol el y f or t he pur pose of maki ng orear ni ng such i ncome, pr of i t s or gai ns” di d not meanmot i ve f or t he t r ansact i on, much l ess can i tmeanul t er i or mot i ve or ul t er i or obj ect . The Cour t hel dt hat as t he i nvest ment s wer e made f or t he pur poseof ear ni ng i ncome, t he i nt er est pai d t her eon woul dbe deduct i bl e under Sect i on 12( 2) of t he Act . ………. .…. .……………………. ”21.Mr . Jai n al so r el i ed upon t he j udgment i nCommi ssi oner of I ncome Tax. Vs. H. H. Mahar ani Shr iVi j aykuver ba Saheb of Mor vi & Or s, [ 1975] 100 I TR 67 ( Bom) ,wher e t he above pr oposi t i on was r ei t er at ed. I n t hat case,sect i on 12( 2) of t he 1922 Act f el l f or consi der at i on. Hecont ended t hat sect i on 12( 2) was hel d appl i cabl e even i f t heexpendi t ur e was made t o pr eser ve t he sour ce of i ncome. We ar enot concer ned her e wi t h such a case. 22.The j udgment s, t hough under Sect i on 12( 2) of t he1922 Act , appl y t o cases under sect i on 57( i i i ) of t he 1961 Act f or as we hel d ear l i er , t he t wo sect i ons ar e t o t he sameef f ect . 23.Mr . Set hi , t he l ear ned counselappear i ng on behal fof t her espondent submi t t ed t hat t he shar es had not beenpur chased by t he assessee f or t he pur pose of maki ng or ear ni ngi ncome, but onl y f or t he pur pose of cont r ol l i ng t he companyM/ s M. Gul ab Si ngh & Sons Pvt . Lt d. I n suppor t of hi scont ent i on, he r el i ed upon t he f act t hat i t i s onl y member s oft he Mal hot r a gr oup who had i nvest ed i n t he shar es of t hecompany. 24.Bot h t he l ear ned counsel s pr oceeded on t he basi st hat any expendi t ur e l ai d out or expended t o acqui r e shar esf or t he pur pose of cont r ol l i ng a company woul d not f al l wi t hi nt he ambi t of Sect i on 57( i i i ) . We, t her ef or e, pr oceed on t hatbasi s wi t hout expr essi ng an opi ni on on t he cor r ect ness of t hesubmi ssi on. The onl y quest i on t hat f al l s f or our consi der at i ont heni s whet her t heassessee pur chased t he shar es f or t hepur pose whol l y and excl usi vel y of maki ng or ear ni ng i ncome orwhet her she di d so f or t he pur pose of acqui r i ng cont r ol of t hecompany. 25.Whet her t he acqui si t i on of shar es i s f or t he pur poseof maki ng or ear ni ng i ncome or whet heri t i s t o acqui r e orgai n cont r ol over t he company woul d depend upon t he f act s ofeach case.Fur t her , consi der i ng t he f act s of t hi s case, i t i snecessar y t o not e cer t ai n aspect s r egar di ng t he concept ofcont r ol i n r el at i on t o a company l i mi t ed wi t h shar es. 25.Whet her t he acqui si t i on of shar es i s f or t he pur poseof maki ng or ear ni ng i ncome or whet heri t i s t o acqui r e orgai n cont r ol over t he company woul d depend upon t he f act s ofeach case.Fur t her , consi der i ng t he f act s of t hi s case, i t i snecessar y t o not e cer t ai n aspect s r egar di ng t he concept ofcont r ol i n r el at i on t o a company l i mi t ed wi t h shar es. 26.Fi r st l y, cont r ol i t sel f i s of di f f er ent t ypes and t oa var yi ng ext ent .We pr esume t hat what i s meant by cont r ol ofa company i s t he abi l i t y t o cont r ol i t s management and af f ai r sby vi r t ue of t he exer ci se of r i ght s as a shar ehol der . Aper son, who hol ds 51 per cent of t he equi t y shar es, woul d bei n a posi t i on t o ensur e t hat an or di nar y r esol ut i on i s passedor def eat ed. A per son, who hol ds 75 per cent of t he equi t yshar es, can ensur e t hat a speci al r esol ut i on i s passed ordef eat ed. A per son, who cont r ol s over 90per cent of t heequi t y shar es of a company, ensur es t hat t he ot her shar e-hol der s, even t oget her , cannot mai nt ai n an act i on f oroppr essi on and mi s- management under sect i ons 397 and 398 oft he Compani es Act except wi t h t he per mi ssi on of t he Cent r alGover nment . I n a gi ven case and dependi ng upon t he spr ead oft he equi t y capi t al , a per son may wel l be i n a posi t i on t ocont r ol t he company wi t h much l ess t han 51 per cent of t heequi t y shar es.Once i t i s conceded t hat sect i on 57( i i i ) i si nappl i cabl e wher e t he pur pose of acqui si t i on of shar es i s t ocont r ol a company and not t o make or ear n i ncome, t hepr oposi t i on woul d appl y i r r espect i ve of t he nat ur e or t heext ent of t he cont r ol . We r ei t er at e t hat we pr oceed on t hebasi s of t he sai d concessi on. 27.Secondl y, t he cont r ol need not necessar i l y be onaccount of t he shar es bei ng hel d by a si ngl e shar ehol der . I fmor e t han one per son hol ds t he cont r ol l i ng i nt er est i n concer twi t h ot her s,i . e. , wi t h t he common pur pose of acqui r i ng ormai nt ai ni ng cont r ol , each of t hem woul d be sai d t o haveacqui r ed t he shar es f or t he pur pose of acqui r i ng ormai nt ai ni ng cont r ol .Whet her t he i nt ent i on or t he pur pose was t o acqui r e cont r ol of a company or not woul d depend upon t hef act s of each case. For i nst ance, i f par t i es act i n concer t ,each of t hem may acqui r e a r el at i vel y smal l per cent age of t heshar e. However , t hei r aggr egat e hol di ng may conf er upon t hem acont r ol l i ng i nt er est . The pur chase of shar es by each of t hemwoul d t hen be f or t he pur pose of acqui r i ng cont r ol over t hecompany. Take f or i nst ance, a case wher e t he member s ofaf ami l y hol d 48per cent of t heequi t yshar e capi t al of acompany. They coul d acqui r e a cont r ol l i ng i nt er est by t heacqui si t i on of mor e t han 2 per cent of t he shar est hr oughanot her member of t he f ami l y. Thi s acqui si t i on of mor e t han 2per cent coul d be a pur chase f or t he pur pose of gai ni ng ormai nt ai ni ng cont r ol over t he company and not f or t he pur poseof i nvest ment . Mer el y because a new shar ehol der pur chases onl yabout2 t o 3 per cent of t he shar es of t he company, i t doesnot f ol l ow t hat t he acqui si t i on was not f or t he pur pose ofgai ni ng cont r ol over t he company. 28.Conver sel y, i t i s possi bl e t hat an acqui si t i on ofshar es i s f or t he pur pose of maki ng and ear ni ng i ncome. I nsuch a case, i f i nci dent al l y, a per son, t oget her wi t h ot her si n t he gr oup, acqui r es cont r ol over t he company, i t woul d notnecessar i l y f ol l ow t hat t he pur chase i s f or t he pur pose ofgai ni ng cont r ol over t he company.Mer el y because t heacqui si t i on of shar es r esul t s i n a per son oragr oup ofper sons acqui r i ng cont r ol of what ever nat ur e and t o what everext ent , i t woul d not necessar i l y f ol l ow t hat t he pur pose oft he acqui si t i on was t o gai n cont r ol . That woul d agai n dependupon t he f act s of t he case. I f t he expendi t ur e i s l ai d out orexpended whol l y and excl usi vel y f or t he pur pose ofear ni ng di vi dends, t he f act t hat t heassessee i nci dent al l y al soacqui r es cont r ol of a company f or hi msel f and/ or f or ot her swoul d make no di f f er ence. He woul d be ent i t l ed t o t he benef i tof sect i on 57( i i i ) f ort he pur pose f or whi ch t he shar es wer eacqui r ed was maki ng or ear ni ng i ncome and not gai ni ng cont r ol .I n such a case, gai ni ng cont r ol of a company woul d be pur el yi nci dent al . I t woul d not even be a mot i ve. Even i f i t was t hemot i ve, i t woul d make no di f f er ence so l ong as t he shar es wer eacqui r ed whol l y and excl usi vel y f or t he pur pose of maki ng andear ni ng i ncome by way of di vi dend. Thi s i s so i n vi ew of t hej udgment s i n Or mer ods ( I ndi a) Pr i vat e Lt d. vs. Commi ssi oner ofI ncome- Tax, Bombay Ci t y,[ 1959] 36 I TR 329 ( Bom) ;Set h R.Dal mi a vs. The Commi ssi oner of I ncome Tax,( 1977) 4 Supr emeCour t Cases 329 and C. I . T. vs. Vi j aykuver ba Saheb of Mor vi ,[ 1975] 100 I TR 67 ( Bom) , r ef er r ed t o ear l i er . 29.I n t he pr esent case, as we not ed ear l i er , t heassessee had acqui r ed about 28 per cent of t he shar es i n t hecompany M/ s M. Gul ab Si ngh & Sons Pvt . Lt d. That by i t sel fwoul d not est abl i sh t hat t he shar es wer e pur chased f or t hepur pose of acqui r i ng cont r ol over t he company. However , as wehave al so hel d, i t i s not an acqui si t i on of over 50 per centof t he equi t y shar e capi t al al one t hatwoul d al l ow gai ni ngcont r ol over a company.The pur pose of acqui si t i on of shar esmust be ascer t ai ned af t er consi der i ng al l t he f act s andci r cumst ances of t he case. 30.I n t he pr esent case, t he assessee acqui r ed about 28per cent of t he shar es i n t he company. I t i s t r ue t hatt heMal hot r a gr oup owns t he ent i r e shar ehol di ng i n t he company. When a par t y buys shar es i n a company, i t i s r easonabl e t opr esume t hat i t does so whol l y and excl usi vel y f or t he pur poseof maki ng or ear ni ng di vi dend i ncome. I f a par t y expect s t hecompany t o do wel l pr esent l y or i n f ut ur e, i t i s but nat ur alt hat i t woul d seek t o acqui r e as many shar es as i t can. Thi st oo woul d be whol l y and excl usi vel y f or t he pur pose of maki ngor ear ni ng i ncome t her ef r om. Par t i es do not acqui r e cont r olf or cont r ol ’ s sake. I n t he pr esent case, t he ot her member s oft he gr oup hel d 72% of t he equi t y shar es. Ther e i s not hi ng t oi ndi cat e t hat t he assessee her sel f or i n concer t wi t h ot her si nt ended acqui r i ng cont r ol f or any r eason. Our at t ent i on wasnot i nvi t ed t o anyt hi ng t hat i ndi cat es any r eason f or t heassessee acqui r i ng t he shar es f or t he pur pose of acqui r i ng oreven mai nt ai ni ng cont r ol . I t i s r easonabl e t hen t o pr esumet hat t he assessee acqui r ed t he shar es whol l y and excl usi vel yf or t he pur pose of maki ng or ear ni ng i ncome. 31.The Tr i bunal appear s t o have pr oceeded onl y on t hebasi s t hat t he ent i r e shar ehol di ng of t he company i s hel d byt he appel l ant al ong wi t h ot her member s of t he gr oup i ncl udi ngher husband and her husband’ s HUF and t he f act t hat t hedi vi dend had not been decl ar ed. Ther e coul d al ways bepr ospect s of t he company doi ng wel l i n f ut ur e. I ndeed, i f t hatwas not t he expect at i on, t he appel l ant woul d not have i nvest edi n t he company at al l . Ther e i s mer el y a f i ndi ng t hat t he r eali nt ent i on appear s t o be t o hol d and acqui r e t he cont r ol of t hecompany,asot her wi se t he assessee and t he ot her f ami l yconcer ns, i n whi chshe i s al so i nt er est ed, woul d not havei nvest ed l ar ge amount by way of i nvest ment par t i cul ar l y whent he company had not decl ar ed any di vi dend. We obser ved ear l i er , nei t her of t hese r easons by i t sel f war r ant s t he concl usi ont hat t he shar es wer e acqui r ed whol l y and excl usi vel y f or t hepur pose of cont r ol and t hat t hey wer e not acqui r ed whol l y andexcl usi vel y f or t he pur pose of maki ng or ear ni ng i ncome. I nt he f act s and ci r cumst ances of t hi s case, t hese t wo f act or seven t aken t oget her do not war r ant t he concl usi on ar r i ved atby t he Tr i bunal . 32.Mr . Jai n r el i ed upon a j udgment of a Di vi si on Benchof t he Cal cut t a Hi gh Cour t i n CI T vs. Model Manuf act ur i ng Co.( P) Lt d. , [ 1980] 122 I TR 767. I n t hat case, t he appel l ant -assessee car r i ed on busi ness as a sel l i ng agent and al so i nspecul at i on and ot her commodi t i es. At t he i nst ance of one ofi t s di r ect or s N. L. Kanor i a,i t pur chased 10, 100 shar es i n t heNew Ci t y of Bombay Manuf act ur i ng Co. Lt d. i n t he names of sai dN. L. Kanor i a and Tul si das Kanor i a who, i n t ur n, sol d t he sai dshar es t o t he assessee on t he same dat e. The sel l er s wer e pai dby bor r owi ng f r om a concer n M/ s Tul si das Kanor i a & Co. Fur t hershar es wer e al so pur chased by t he assessee i n t he name of oneJhunj hunwal a, a r el at i ve of t hei r s. The pr i ce of t hese shar eswas pai d by t aki ng anot her l oan f r om t he sai d M/ s Tul si dasKanor i a & Co. The quest i on t hat ar ose was whet her t he i nt er eston t he amount s bor r owed by t he assessee f or pur chasi ng shar eswas al l owabl e as busi ness expendi t ur e. The I TO f ound t hat t heshar es had been pur chased wi t h a vi ew t o acqui r i ng cont r ol l i ngi nt er est i n t he company f or and on behal f of Kanor i as. The I TOal so f ound t hat i n t he subsequent assessment year t he assesseehad ent er ed i nt o f ur t her t r ansact i ons i n pur chase and sal e oft hese shar es at cost pr i ce wi t hout pr of i t or l oss.The AACconf i r med t he or der . The Tr i bunal , however , di d not agr ee wi t h t he f i ndi ng t o t he ef f ect t hat i nt er est shoul d not be al l owedagai nst t he assessee’ s i ncome f r om ot her sour ces. The Di vi si onBench al so r ef er r ed t o t he j udgment i nOr mer ods ( I ndi a)Pr i vat e Lt d. ( supr a) and hel d as under : - t he f i ndi ng t o t he ef f ect t hat i nt er est shoul d not be al l owedagai nst t he assessee’ s i ncome f r om ot her sour ces. The Di vi si onBench al so r ef er r ed t o t he j udgment i nOr mer ods ( I ndi a)Pr i vat e Lt d. ( supr a) and hel d as under : - “ 21. I t al so appear s t o us t hat , even ot her wi se, t hecont ent i on of t he r evenue cannot be sust ai ned onmer i t s i n vi ew of t he deci si on of t he Bombay Hi ghCour t i n t he case of Or mer ods ( I ndi a) P. Lt d. ’ s case,[ 1959] 36 I TR 329, wher e t he Hi gh Cour t made a cl eardi st i nct i on bet ween mot i ve and pur pose on f act s al mosti dent i cal t o t hose bef or e us. Thi s deci si on has beenappr oved by t he Supr eme Cour t . We f ol l ow t he sai ddeci si on wi t h r espect and dr aw si mi l ar di st i nct i onbet ween mot i ve and pur pose and hol d t hat i n t hei nst ant case, t hough t he ul t i mat e or ul t er i or mot i veof t he assessee mi ght have been t o conf er cont r ol l i ngi nt er est ei t her t o i t sel f or t o t he Kanor i as, yet t hei mmedi at e pur pose f or acqui si t i on of t he shar es was t oear n i ncome f r om t he di vi dends t her eof . We add t hateven i f t he mot i ve of t he assessee mi ght have been t oobt ai n cont r ol of anot her company, t he consequentpur chase of shar es may st i l l be t r eat ed as i nvest mentand t he concur r ent pur pose of t he assessee coul d wel lhave been t hat of ear ni ng f ur t her i ncome by acqui r i ngt he cont r ol of t he ot her company. ” The j udgmenton f act s appl i es wi t h gr eat er f or ce t o t he pr esent case wher e i t i s not even est abl i shed t hat t hemot i ve and pur pose of t he assessee acqui r i ng shar es was t oacqui r e or mai nt ai n t he cont r ol l i ng i nt er est .Havi ng sai dt hat , i t must be not ed t hat t he j udgment r eal l y t ur ned on t hef act s of t he case. The Cour t anal yzed t he f act s of t he case i nar r i vi ng ati t s concl usi on. I t i s not f or us t o consi derwhet her t he anal ysi s of t he f act s i s cor r ect or not and wer ef r ai n f r om doi ng so. Whet her our anal ysi s of t he f act s andper cept i on t her eof woul d be t he same or not i s i r r el evant . Thej udgment , however , suppor t s Mr . Jai n’ s cont ent i on t hat whi l econsi der i ng such a case, a di st i nct i on must be dr awn bet weent he pur pose and t he mot i ve of an assessee i n i ncur r i ng t heexpendi t ur e and expendi ng t he same. 33.Mr . Set hi , on t he ot her hand, r el i ed upon a j udgmentof t he Di vi si on Bench of t he Guj ar at Hi gh Cour t i n Sar abhaiSons ( P. ) Lt d. vs. Commi ssi oner of I ncome- Tax, [ 1993] 201 I TR464. I n t hat case, t heassessee der i ved i ncome f r om i t svar i ous act i vi t i es i ncl udi ng deal i ng i n t he pr oduct s of i t ssi st er concer n. I t was a shar ehol der of Swast i k Oi l Mi l l s Lt d,r ef er r ed t o t her ei n as “ SOML” ,and was al so i t s managi ngagent . I t hel d 11264 shar es of SOML. Two ot her gr oups al sohel d shar es. The t hr ee gr oups deci ded t hat al l t he shar es behel d by t he assessee t o f aci l i t at e t he i mpl ement at i on ofanexpansi on pr oj ect . The assessee acqui r ed t he shar es at a pr i cet o be pai d i n i nst al ment s car r yi ng i nt er est at 10% per annum.The assessee encount er ed some di f f i cul t i es i n acqui r i ng t hebal ance shar es of SOML f r om t he ot her shar ehol der s. A companyKar amchand Pr emcha