Judgment : BHASKAR BHATTACHARYA, J. This appeal under Section 260A of the Income-tax Act, 1961 (“Act”) is at the instance of the assessee and is directed against an order dated May 29, 2003 passed by the Income-tax Appellate Tribunal, “C” Bench, Kolkata, in ITA No.459 (Kol) of 2002 for the Assessment Year 1998-99 by which the Tribunal allowed the appeal preferred by the Revenue and set aside the order of the CIT (Appeals). Being dissatisfied, the executors to the estate of the assessee have come up with the present appeal. The facts giving rise to filing of this application may be summed up thus: a) The assessee during his lifetime carried on business of dealing in shares and money lending. The assessee had also made some investments and was the owner of a house property from which he was in receipt of rental income. b) The assessee used to borrow funds for the purpose of his business and used to pay interest on such borrowed sum to his creditors and claimed deduction in computing his business income. The particulars of the capital of the assessee, unsecured loans taken by him, investments made, loans given and stock-in-trade for the financial years ending on March 31, 1995, March 31, 1996, March 31, 1997 and March 31, 1998 are set out below: c) It would appear from the aforesaid tabulation that as on March 31, 1995, the assessee’s capital was in excess of Rs.50 lakh and the total amount of loan taken by him was also in excess of Rs.50 lakh. The assessee had, however, given loan to the extent of Rs.3.87 lakh. During the said financial year ending on March 31, 1995, the assessee paid interest of Rs.8.89 lakh and received interest of Rs.1.83 lakh and the net amount of Rs.7.06 lakh was claimed as business expenditure for the previous year ending on March 31, 1995 relevant to the Assessment Year 1995-96. The Assessing Officer accepted the assessee’s claim for deduction of the net interest so calculated as business expenditure under Section 143(3) of the Act on September 16, 1996. d) As on March 31, 1996, the assessee’s capital was in excess of Rs.70 lakh and the unsecured loans remained more or less at the same figure as on March 31, 1995. The Assessing Officer accepted the assessee’s claim for deduction of the net interest so calculated as business expenditure under Section 143(3) of the Act on September 16, 1996. d) As on March 31, 1996, the assessee’s capital was in excess of Rs.70 lakh and the unsecured loans remained more or less at the same figure as on March 31, 1995. The amount of loan given, on the other hand, went up to Rs.40.11 lakh from Rs.3.87 lakh as on March 31, 1995. During the financial year ending on March 31, 1996, the assessee paid interest of Rs.7.13 lakh and received interest of Rs.3.41 lakh and the net interest of Rs.3.72 lakh, being the difference of the above two figures, was claimed as business expenditure. The return filed by the assessee for the Assessment Year 1996-97 relevant to the Financial Year ending on March 31, 1996 was assessed under Section 143(1) of the Act by accepting the assessee’s claim for deduction of net interest as business expenditure. e) During the financial year ending on March 1997, the capital of the assessee as also the amount of loan given by him remained more or less at the same figures as on March 31, 1997. However, the amount of loan taken went up from Rs.53.12 lakh to Rs.98.38 lakh, investments went up to Rs.55.71 lakh to Rs.66.79 lakh and stock-in-trade from Rs.18.34 lakh to Rs.50.10 lakh. The funds borrowed during the previous year ending on March 31, 1997 were utilised in the business as a result of which there was substantial increase in the stock-in-trade of the business. For the financial year ending on March 31, 1997, the assessee paid interest of Rs.15.83 lakh and received interest of Rs.3.06 lakh and the net amount of Rs.12.76 lakh was claimed by him as business expenditure. The return filed by the assessee for the Assessment Year 1997-98 relevant to the previous year ending on March 31, 1997 was assessed under Section 143(1) of the Act by accepting the assessee’s claim for deduction as the net interest towards business expenditure. f) During the financial year ending on March 31, 1998, towards the beginning of the year itself, the assessee received back the amount of Rs.39.60 lakh given by him to others as loan which and that amount was utilised by the assessee to pay off a part of the loan taken by him. f) During the financial year ending on March 31, 1998, towards the beginning of the year itself, the assessee received back the amount of Rs.39.60 lakh given by him to others as loan which and that amount was utilised by the assessee to pay off a part of the loan taken by him. Further, the assessee sold a substantial part of his stock-in-trade and utilised the sale proceeds for paying off some amount of unsecured loan, as a result, as on March 31, 1998, the unsecured amount of loan taken by the assessee stood reduced from Rs.98.88 lakh as on March 31, 1997 to Rs.30.95 lakh. As on March 31, 1998, there was no loan given by the assessee to anyone. Since the entire amount of loan given by the assessee was received back at the beginning of the year itself, he received interest of paltry amount of Rs.16,838/-. However, the assessee had to pay a sum of Rs.6.21 lakh in respect of the borrowed funds and claimed that the net amount of interest paid by him as calculated in the earlier years should be constituted as business expenditure. g) The Assessing Officer, however, by the order of assessment held that the interest paid by the assessee was not a business expenditure and disallowed the net interest of Rs.6,03,930/- in computation of the business income by his order dated November 28, 2000. h) Being dissatisfied, the assessee preferred an appeal before the CIT (Appeals) and the said appellate authority by order dated February 21, 2002 allowed the same. It appears that the appellate authority examined the entire facts and also took into consideration the previous assessments of the assessee and held that the finding of the Assessing Officer that borrowed funds were used for giving loan for making investments was not correct. i) Being dissatisfied, the Assessing Officer preferred an appeal before the Tribunal below and the Tribunal by the order dated May 29, 2003 allowed the appeal of the Revenue by setting aside the order passed by the Commissioner of Income-tax (Appeals) and restoring the order of the Assessing Officer. j) Being dissatisfied, the executors of the assessee have come up with the present appeal under Section 260A of the Act. j) Being dissatisfied, the executors of the assessee have come up with the present appeal under Section 260A of the Act. A Division Bench of this Court at the time of admission of this appeal formulated the following substantial questions of law for determination: “(a) Whether the Tribunal was justified in law in restoring the disallowance of interest expenditure of Rs.6,03,930/- incurred by the assessee for the purpose of his business which was deleted by the Commissioner of Income Tax (Appeals) and its purported findings in that behalf are arbitrary, unreasonable and perverse. “(b) Whether the Tribunal was justified in law in ignoring the assessee’s profit and loss accounts, balance sheet, computations, details etc. for the assessment years 1995-96 to 1998-99 and the assessments/intimations for the assessment years 1995-96 to 199798 based on which the Commissioner of Income Tax (Appeals) had granted relief to the assessee and which are all before the Tribunal.” After going through the materials on record, we find that the Assessing Officer has refused the claim of payment of interest as business expenditure by making following observations: “2. In the Profit & Loss A/c, the assessee debited a sum of Rs.6,20,767/- as interest paid. Obviously interest was paid on loan taken by the assessee. It is required, therefore, to be examined whether the loan fund was utilised for the purpose of business. The details of loan were called for. It is found that most of the loans were taken in the immediate proceeding year and the balance carried over to this assessment year. The assessee filed details of such loans. From the details, it is found that the assessee obtained substantial amount of loan from various parties and at the time of substantial amount of loans were given to different parties. It is also found that loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of loan. The assessee acted as conduit of such loan transactions. However, the assessee debited substantial amount of interest, but very negligible amount of Rs.26,782/- was recovered from the loan given against loan of Rs.6,20,747/-debited to the P&L A/c. From the Balance Sheet it is also found that the interest so debited is not related to the business transactions. Out of Rs. 98,88,315/-i.e. the balance standing on 31.03.97 which is carried over to this asstt. Out of Rs. 98,88,315/-i.e. the balance standing on 31.03.97 which is carried over to this asstt. Year an amount of Rs.12,50,000/- has been utilised for the purchase of shares. It is also noted that in some cases, loans were almost transferred to other parties on the same date of receipt. For the sake of convenience, the loan transactions particularly immediate proceeding asstt. Year may be summarised as follows:- “3. The above chart clearly shows that the loan fund has not been utilised for the purpose of business activities of the assessee except for a fraction of loan utilised for the purpose of investment in shares.” (Emphasis supplied by us). On an appeal by the assessee, the CIT (Appeals), however, reversed the said decision and in allowing the appeal, the said authority observed as follows: “3. The appellant being an individual borrowed funds for the purpose of his business of share dealings and paid interest on such borrowings. During the year under appeal, the appellant sold few shares and out of sale proceeds the money was returned to the loan creditors. The appellant also received back the amount from loan debtors and was returned to the loan creditors. The appellant to keep the commitment for payment to loan creditors has to take loans from fresh parties and paid interest. In all cases the appellant charged and paid interest whatever the case may be. Thus, after sale of shares and fresh loan transactions the net result as per balance sheet stood as under:- Asstt. Year 1997-98 Asstt. Year 1998-99 Loans and advances 98,88,315 stock in shares 50,09,860 Interest paid 15,82,633 Loans 39,60,000 Interest 3,06,349 Loans and advances 30,94,615 Stock in shares 28,64,624 Loans ------- Interest paid 6,20,767 Interest received 16,837 “4. From the above facts as contended by the learned counsel of the appellant it is clear that the loan taken by the appellant remains utilised in stock of shares meant for trading purpose only and not for investment in shares as mentioned by the AO in his order. The AO’s conclusion that loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of a loan is not correct. His conclusion that the appellant acted as conduit of such transactions is also not without any base. The AO’s conclusion that loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of a loan is not correct. His conclusion that the appellant acted as conduit of such transactions is also not without any base. There was transfer of loans from one party to another party and it remained for the purpose of business. The AO has not understood the two separate business of the appellant in which as per the balance sheet the investment in shares and the other business, trading stock in shares are shown separately from year to year. The interest was claimed only for business purpose and not for investment in shares. Therefore, the net interest claimed as expenditure at Rs.6,03,930/= disallowed by the AO is allowable expenditure and is, thus, allowed.” (Emphasis supplied by us). On an appeal by the Revenue, the Tribunal below, however, set aside the order of the CIT (Appeals) and restored the one passed by the Assessing Officer by making following observations: “7. We have heard the rival submissions and perused the records, we have noticed that the A.O. found that the assessee obtained substantial amount of loan various parties and at the same time substantial amount of loans was given to different parties. The assessee also could not prove that the loans were given for business transaction. The A.O. also mentioned that the loan transaction simply shows that the loans taken were transferred to the parties by way of loan. We have further noticed that the assessee debited substantial amount of interest but very negligible amount of Rs.26,780/= was recovered from the loan given against interest of Rs.6,20,747/= debited to the P & L A/c. From the Balance Sheet also it is found that the interest so debited is not related to the business transaction and out of Rs.98,88,315/= i.e. the balance standing as on 31-03-1997 which is carried over the instant year an amount of Rs.12,50,000/= has been utilised for the purchase of shares. It is not also out of place to mention that in some cases we have noticed that the loans were almost transferred to other parties on the same date of receipt. In view of the foregoing, we are of the considered opinion that the Ld. It is not also out of place to mention that in some cases we have noticed that the loans were almost transferred to other parties on the same date of receipt. In view of the foregoing, we are of the considered opinion that the Ld. CIT (A) was not at all justified in holding that the interest was claimed only for business purpose and not for investment in shares. We, therefore, reverse the order of the Ld. CIT (A) and restore that of the A.O.” (Emphasis supplied by us). After hearing the learned Counsel for the parties and after going through the materials on records we find that there is no dispute that the assessee had, inter alia, money lending business and the various transactions of money lending as well as taking of loan in support of such money lending business have been reflected from the transactions of the assessee for the previous assessment years. We have already pointed out that the returns submitted by the assessee for last three assessment years have been accepted by the Assessing Officer and thus, the amount of subsisting loan given by the assessee to various parties and the loan taken from different parties are not in dispute. The reason assigned by the Assessing Officer for disallowing the interest paid as business expenditure in this assessment year is that the assessee obtained substantial amount of loan from various persons and at the same time, substantial amount of loan was given to different parties and according to the Assessing Officer, “loans were not given for the sake of business transactions but simply the loans taken were transferred to the parties by way of loan and the assessee acted as conduit of such loan transactions”. In making such observations, the Assessing Officer totally overlooked the fact that the assessee being also a money lender is entitled to receive interest from the loan advanced by him as his profit and at the same time, is at liberty to take loan for running the money lending business. There is no prohibition of taking loan for running a money lending business and an assessee is lawfully entitled to deduct the interest paid on such loan as business expenditure as provided in the Act. There is no prohibition of taking loan for running a money lending business and an assessee is lawfully entitled to deduct the interest paid on such loan as business expenditure as provided in the Act. It is not the law that money lending business must be run out of one’s own money without taking loan from others or that interest paid on loan for running such business is not allowable as business expenditure. Even the interest received by the assessee for the last three years has not been treated as income from other source but has been included within the business income of the assessee. Thus, the various transactions of granting and taking loan by the assessee not having been disbelieved and being supported by the profit and loss account of the previous years, the assessment of which had attained finality, the Assessing Officer illegally refused to allow the amount of interest paid by the assessee for various loans taken by him for running the businesses for the relevant assessment year. The CIT (Appeals), as it appears from the order passed by him, took into consideration such fact and in addition to that arrived at a finding that the Assessing Officer has not understood the existence of two separate businesses of the assessee, viz. investment in share and trading in share, in which as per the balance sheet, the investment in both the aforesaid businesses are shown separately from year to year. The said appellate authority further held that interest was claimed only for business purpose and not for investment in shares. The Tribunal below, on the other hand, totally overlooked the aspect of the money lending business of the assessee and preferred to follow the reasons assigned by the Assessing Officer that the most of the amount taken on loan was not utilized for the business of the assessee by not giving any reason for discarding the finding arrived at by the CIT (Appeals). We, therefore, find that the Tribunal below committed substantial error of law in reversing the order of the CIT (Appeals) and restoring the one passed by the Assessing Officer. We, however, find that on the date of disposal of the appeal preferred by the assessee before the CIT (Appeals), the provisions contained in Section 14A of the Act had already come into operation with retrospective effect from April 1, 1962. We, however, find that on the date of disposal of the appeal preferred by the assessee before the CIT (Appeals), the provisions contained in Section 14A of the Act had already come into operation with retrospective effect from April 1, 1962. According to the said provision, no deduction shall be allowed in respect of an expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act and thus, it was the duty of the CIT (Appeals) to examine the records in the light of the provisions contained in Section 14A of the Act for the purpose finding out the actual deduction permissible in the facts of the case as admittedly the income of the assessee included also income from dividend which did not form part of this total income under the Act. We, therefore, set aside the orders of both the CIT (Appeals) and the Tribunal below and remand the matter to the Assessing Officer with a direction upon him to treat the entire amount of interest paid by the assessee to his creditors as business expenditure and to treat the amount of interest received by the assessee from his debtors as his income from money lending business subject, however, to the provisions contained in Section 14A of the Act. In other words, if any loan has been taken by the assessee in relation to the income which does not form part of his total income under the Act, the assessee will not get deduction of interest paid on that amount. Since the matter is pending for a long time, we direct the Assessing Officer to conclude the assessment positively within three months from the date of communication of this order to the said officer. The appeal is, consequently, allowed by answering both the points formulated by the Division Bench in the negative and against the Revenue. In the facts and circumstances, there will be, however, no order as to costs. I agree.