COMMISSIONER OF INCOME TAX Vs. MODI PVT LIMITED

JUDGEMENT

(1.) THE assessee is M/s Modi Pvt. Ltd. The assessment years involved are 1960 61 to 1963 64. The assessee, at the material time, was a private limited company incorporated on 21st Sept., 1946. The assessee company was appointed managing agent of a public limited company known as Western India Theatres Ltd., for a period of 20 years from 26th Sept., 1946. Ordinarily, the managing agency agreement would have come to an end on 26th Sept., 1966. However, by virtue of S. 330 of the Companies Act, 1956, the date of expiry was advanced to 15th Aug., 1960.

(2.) THE assessee company had purchased blocks of shares of Western India Theatres Ltd., by resorting to borrowings. Its total shareholding in Western India Theatres Ltd., as on 31st June, 1962, stood at 18,425 shares of the value of Rs. 5,58,080 out of a total of 87,872 shares of Western India Theatres Ltd. In the accounting year 1962 63, the assessee purchased a further block of 1,314 shares of Western India Theatres Ltd., as also a majority of shares of another company known as Associated Bombay Cinemas Ltd., which was running the Strand Cinema at Bombay. These investments were made by resort to borrowings and the assessee incurred interest payments as under :

(3.) FROM the above facts and circumstances, the following question is referred to us under S. 256(1) Asst. yr Interest . Rs1959 60 19,9081960 61 25,5201961 62 25,1251962 63 21,1981963 64 68,471of the IT Act, 1961 :