ORDER :

Bhargav D. Karia, J.

1. Heard learned Senior Standing Counsel Mr.Varun K. Patel with learned advocate Mr.Dev Patel for the appellant and learned advocate Mr.B.S.Soparkar for the opponent.

2.1. This Tax Appeal is remanded back by the Supreme Court vide order dated May 6, 2008 in Civil Appeal No.3343 of 2008 arising out of the S.L.P. (C) NO.14531 of 2007 whereby, the appellant revenue challenged the order dated 20th December, 2006 passed by this Court in this Tax Appeal dismissing the same on the ground that no substantial question of law arises from the impugned common order dated 09.11.2005 passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench ‘A’ in ITA No.2339/Ahd/2000 for Assessment Year 1997-98. The Tribunal has also decided the appeal being ITA No.2329/Ahd/2000 with CO No.78/Ahd/2003 for Assessment Year 1996-97 in case of M/s. Akalu Holdings Private Limited in the said common order.

2.2. The Tribunal decided ITA No.2329/Ahd/2000 as a lead matter and followed the reasoning in the ITA arising in the case of the respondent-assessee being ITA No.2339/Ahd/2000 for Assessment Year 1997-98.

2.3. The Revenue has proposed the following question of law in the Tax Appeal which was not admitted by this Court by order dated 20.12.2006 :

“Whether the appellate tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the disallowance of interest which was made by the Assessing Officer u/s. 36(1)(iii) on the ground that the purchase of shares was mainly for acquiring controlling rights in another company”

2.4. The order passed by this Court dated 20.12.2006 reads as under :

“Heard Shri M.R.Bhatt, learned counsel for the appellant -Revenue.

The following substantial question of law is proposed for admission of this appeal.

“Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the disallowance of interest which was made by the Assessing Officer u/s 36(1)(iii) on the ground that the purchase of shares was mainly for acquiring controlling rights in another company?”

While considering the issue raised in the question, the Tribunal has considered the aspects as under :

“4. The learned counsel for the assessee contended that the issue is covered in favour of the assessee in one of the associate group concerns for the same Asstt. Year 1996-97 in ITA No.867/Ahd/2001, ACIT vs. Ataku Holdings Pvt. Ltd. order dated 15.9.2003. Facts are similar, which is evident from the record that the name of this sister concern Ataku Holdings Pvt. Ltd., has been referred by the AO on page No.7, Para-(iv) of his order. The Tribunal allowed similar claim of interest as business expenditure by following observations.

“6. I have considered the submissions made by the learned representatives of the parties and have gone through the orders of the learned Departmental Authorities. The facts relating to the aforesaid controversy have already been briefly stated hereinbefore. The learned CIT(A) has given very elaborated and convincing reasons while deleting the disallowance of interest of Rs.3,14,928/-. He has also given convincing reasons to support his conclusion that the facts in the case of Sarabhai Sons (P) Ltd (supra) are clearly distinguishable as compared to the facts of the present case. The Memorandum of Association of the assessee company clearly shows that the main object of the company was to carry on the business of acquiring, holding and selling of shares and debentures. The assessee acquired the shares of NKL out of funds borrowed from M/s. AHPL, which was well covered within the main object clause of assessee's business as enumerated in the memorandum of Association. These shares were also sold in the next year. The assessee received income from dividend on these shares in the year under consideration. It is true that the dividend has been assessed under the head “income from other sources” by virtue of a special provision containing in the IT Act but such