COMMISSIONER OF INCOME TAX Vs. PENINSULAR INVESTMENT LTD

JUDGEMENT

(1.) This appeal is filed by the Revenue under Section 260A of the Income-tax Act, 1961 (for short "the Act") challenging the order dated 31-07-2008 in I.T.A. No. 506/Hyd/2007 of the Income Tax Appellate Tribunal, Bench "A", Hyderabad. The issues in this appeal are:

(2.) The assessee is M/s. Peninsular Investments Limited engaged in the business of investment in shares. It is a part of ITC group of Companies along with other companies such as M/s. Russel Credit Ltd and M/s. Russel Investments Ltd. In the financial year 2002-03 (relevant to the assessment year 2003-04), the assessee had taken a loan of Rs. 60.19 crores from M/s. Russel Credit Ltd. and M/s. Russel Investments Ltd. and utilized Rs. 23.78 crores from such loan for purchase 10,33,323 shares of M/s. E.I.H Limited (another group company). It later sold 8,70,000 shares of the said company.

(3.) It filed its return of income for the assessment year 2003-04 declaring nil income and an amount of Rs. 3,28,614/- under the provisions of Section 115JB of the Act. As per the profit and loss account enclosed to the return of income, the assessee showed an amount of Rs. 3,65,14,210/- as interest paid during the year towards loan taken for purchase of shares. A dividend of Rs. 6,23,502/- was earned on 1,03,917 shares and this was shown as "dividend" income in the return filed by the assessee for the assessment year 2003-04. The return was processed under Section 143(1) on 31-03-2004. The case was selected into scrutiny and a notice under Section 143(2) of the Act was issued to the assessee on 18-10-2004.