COMMISSIONER OF INCOME-TAX Vs. RAMA MUNJAL

JUDGEMENT

(1.) These are two petitions under s. 256 (2) of the IT Act, 1961 (for short, the 'act') by the CIt seeking a direction to the Appellate Tribunal, Chandigarh (for short, the 'tribunal') to refer to this Court the following identical question of law relating to the asst. yrs. 1985-86 and 1986-87 : "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing interest as claimed by the assessee at higher rate on borrowings to the nominal fixed expected return on investments made in purchase of shares out of such borrowings in family concerns ignoring the findings of Hon'ble Supreme Court in Mc Dowell and Co. Ltd. vs. CTo (1985) 154 ITR 148 (SC) and CIT vs. Ali Sons Export Co. (1991) 191 ITR 208 (All) : 191 ITr 208 (All) : TC 54r. 699 ?

(2.) The assessee derived income as a partner in a partnership firm, M/s Munjal Castings, Ludhiana, and also from property, besides earning interest and dividends. She showed payment of interest amounting to Rs. 14,574 on the borrowings @ 16 per cent per annum in the asst. yr. 1985-86. Such borrowings were made for the purchase of 4 per cent preference shares of M/s Rockman Cycle Industries, Ludhiana. Since a return @ 4 per cent per annum only was expected from the shares, the AO disallowed interest amounting to Rs. 8,669, being interest in excess of 4 per cent on the borrowings. While making assessment for the next asst. yr. 1986-87, the AO, for similar reasons, disallowed interest amounting to Rs. 5,652. In the appeal filed by the assessee, the Dy. CIT declined to interfere and affirmed the order of the AO. In further appeal, the Tribunal accepted the assessee's plea and decided the matter in her favour following its view earlier taken in the case of Pankaj Munjal Family Trust, Ludhiana and certain other assessees belonging to the same group.

(3.) Shri R. P. Sawhney, learned senior counsel for the Revenue, has argued that the Tribunal has rejected the application filed by the Revenue seeking reference of the question under s. 256 (1) of the Act on the sole ground that the application seeking reference of a similar question in the case of Pankaj Munjal Family Trust for the asst. yrs. 1986-87 and 1988-89 had been rejected by it earlier. He pointed out that, on a direction from a Bench of this Court, the Tribunal thereafter submitted a statement of the case and referred to this Court on a similar question of law relating to various assessment years in the case of Pankaj Munjal Family Trust.