Judgment:
1. The substantial questions of law as enumerated in the appeal memo are as follows:
(a) The substantial question of law arises in the present appeal is regarding the true scope and correct interpretation of Section 68 of the Income Tax Act, 1961 and other provisions and whether on the facts and circumstances of the case and in law the Honble Tribunal is right in upholding the order of the Commissioner (Appeals) and deleting the addition of Rs. 41,93,729 being the disallowance consisting of fresh loans and the interest on old loans ?
(b) Another substantial question of law which arises in the present appeal is regarding the true scope and correct interpretation of Section 57 of the Income Tax Act, 1961 and other provisions and whether on the facts and circumstances of the case and in law the Honble Tribunal is right in deleting the disallowance of Rs. 17,84,036 being the interest and finance charges paid?
2. As regards question (a), the answer to the same hinges on the fact as to whether the five fresh loans for the total amount of Rs. 38,10,000 taken by the assessee were genuine in nature. It was never in dispute that all these fresh loans were taken by account payee cheques and the record indicated that there was no cash payment in the account of the loanee prior to the issuance of such cheques. After analysing the entire evidence regarding grant of these loans, there is a concurrent finding of fact of Commissioner (Appeals) as well as Tribunal that the loans were genuine loans. The details of repayments were also furnished. There is also a concurrent finding that the amount of Rs. 4,36,838 was the interest paid by the assessee on such genuine loans. This being a concurrent finding of fact, we find that the additions in respect of such loans and interest were correctly held not to be sustainable and the question of law as framed does not arise.
3. In respect of the aforesaid ground it was also sought to be contended by counsel for the revenue that all the documents filed before the Commissioner (Appeals) were not made available to the assessing officer. There appears to be no substance in this contention. It is mentioned in para 4 of the Tribunals judgment that two paper books were filed before the Commissioner (Appeals) and the assessing officer was given opportunity to examine the additional corroborative documents.
4. As regards question (b), the assessing officer has disallowed the interest and finance charges of Rs. 17,84,036 in respect of the loans borrowed. The assessee had claimed a deduction under Section 57(iii) of the Act. The assessing officer disallowed this amount on the ground that the assessee had not fulfilled the conditions of claiming deductions under Section 57(iii) read with Section 58 of the Act by holding that the expenditure was not proved to be related to the purpose of earning income. He held that as the activity of the assessee was earning profits by selling shares in the stock market and the dividend income had accrued as a by-product, the expenditure was not incurred wholly for the purpose of earning income. In the assessees appeal, Commissioner (Appeals) observed that the assessing officer had not disputed the purchase and sale of shares as a part of investment. The investment in shares was to the tune of Rs. 72 lakhs as disclosed in the balance sheet of the assessee. The assessee had also received income by way of dividends on these shares. This income along with finance charges and the interest was shown as income from other sources. The interest was paid on loans obtained for making these investments in shares and relying upon the judgment of the Supreme Court in the case of Seth R. Dalmia v. CIT : (1977) 106 ITR 895 (SC) wherein it was held that the nexus between the expenditure and the income need not be direct and even an indirect connection could prove the nexus between the expenditure incurred and the income earned, he held that the expenditure to be deductible. He further held that the quantum of dividend earned had nothing to do with the quantum of claim of interest made under Section 57(iii) of the Income Tax Act. In such circumstances, the Commissioner (Appeals) allowed the finance expenditure at Rs. 17,84,036 as a deduction under Section 57(iii) of the Income Tax Act. The finding that the aforesaid amount represented payment of interest and finance charges in relation to genuine loans has been confirmed by the Tribunal and this is also a question of fact. In these circumstances, the question of law as framed also does not arise.
5. In view of the aforesaid findings, there is no substance in the appeal and the same is summarily dismissed.