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Issues involved: Interpretation of sections 36(1)(iii) and 57(iii) of the Income-tax Act, 1961 regarding the disallowance of interest on term loan.
Summary: The Commissioner of Income-tax, Meerut, sought direction for the Income-tax Appellate Tribunal, Delhi, to refer the question of law regarding the deletion of the disallowance of interest on a term loan. The respondent-assessee invested the term loan amount in equity shares due to project delays. The assessing authority disallowed the interest claim, stating it was not utilized for business purposes. However, the Tribunal allowed the claim under sections 36(1)(iii) and 57(iii) as the respondent-assessee had invested in fixed assets and earned dividends. The Tribunal's decision was based on evidence and aligned with legal principles, hence rejecting the Commissioner's proposed question of law. In conclusion, the Tribunal's decision to delete the disallowance of interest on the term loan was upheld as legally sound and based on the evidence presented, in accordance with relevant legal precedents.
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