Commissioner of Income Tax vs Dharam Singh Babek Singh

Dalip K. Kapur, C.J.—The question of law proposed in this application under s. 256(2) of the IT Act, 1961 is in the following terms :

"Whether, on the facts and in the circumstances of the case, the ITAT was correct in law and on the facts of the case, in holding that the assessed was entitled to deduction on account of interest paid by it on loans raised even though there was no nexus between the loan raised and the business run by the assessed ?"

This is for asst. yr. 1979-80. Learned counsel for the petitioner states that some references under s. 256(2) raising similar questions relating to the assessed for some other assessment years are pending''. We are of the view that the question whether such a question arose in the earlier year or not would of course be a ground on which the applicant could rely provided this question did arise for this year.

There is no finding by any authority to the effect that there was no nexus between the loan raised and the business of the assessed. This was not held even by the ITO for he merely stated that he disallowed the interest because it had been disallowance in some other year. The CIT (Appeals) who heard the appeal gave a finding in clear terms that there is no evidence whatsoever leading to a conclusion that the loan was not used for business purposes. He stated :

"and in the absence of any evidence leading to a different conclusion, the disallowance made is deleted."

Thus the finding of the CIT (Appeals) was one of facts. In appeal before the Tribunal by the Department it was observed that similar disallowances had been restored even in earlier years. This does not mean that there is any connection between the conclusion in this year and the conclusion in earlier years. In fact the same conclusion was reached in 1973-74, 1974-75 and 1977-78. But we are unaware what question arose out of the tribunal''s orders in that year. We are satisfied that the question proposed does not arise out of the Tribunal order or even out of the ITO''s order. There is no connection between the same. The department is not entitled now to ask for a different question. So the reference application has to be rejected in liming. We order accordingly.