IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 6TH FEBRUARY 2008 / 17TH MAGHA 1929 ITA.No. 198 of 2001() --------------------- ITA.394/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.P.K.R.MENON(SR.),SC FOR IT RESPONDENTS: ------------- M/S. CHACKOLAS SPINNING AND WEAVING MILLS, KALAMASSERY. BY THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 198 OF 2001 -------------------------------------------- Dated this the 6th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. Heard senior counsel appearing for the appellant. This appeal is against the Tribunal's order confirming CIT (Appeals) order granting reduction of Rs. 15,26,180/- towards interest claimed by the assessee for the assessment year 1989-90. The assessee, a textile mill, during the relevant previous year diversified its activities to business in real estate. Land at high cost was acquired for the purpose of business in real estate. Even though sale deed was not executed, more than 80% of the sale price was paid for the property and possession was also taken over by the assessee. Since sale deed could not be executed in accordance with schedule under the agreement for sale, time was granted by the sellers on condition of payment of interest. The deduction claim by the assessee is interest for belated payment of sale consideration. Even though purchase of property is from the directors 2 of the company, department has no case that the transaction is not bona fide or for any ulterior purpose. The Tribunal also noticed on reference to the Balance Sheet that the assets are current assets acquired for the purpose of business in real estate. Even though sale deed is not executed, possession is transferred to the company as envisaged under Section 2(47)(v) of the I.T. Act. In view of the finding of fact by the Tribunal that possession was taken by the assessee-company and substantial amount was paid towards sale consideration and the balance is only execution of sale deed, interest paid on the borrowed capital for acquisition of current asset for business purpose is an allowable deduction and the Tribunal rightly held so. We find no substantial question of law arising from the order of the Tribunal warranting interference in appeal. Appeal is accordingly dismissed. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk 3