9911796707
TMI Blog1999 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... er in I.T.C. No. 20 of 1985, directing the Tribunal to refer the following question for its opinion : "Whether, on the facts and in the circumstances of the case, the interest payable amounting to Rs. 3,97,477 and Rs. 1,04,474 for the assessment years 1976-77 and 1977-78, respectively, by the company is allowable as revenue expenditure ?" Now the question is referred to this court. The facts l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as shown in article 5(B) of the agreement. The assessee-company accordingly paid the instalments including interest and the interest debited to the profit and loss account for the assessment year 1976-77 was Rs. 3,97,477 and for the assessment year 1977-78 it was Rs. 1,04,474. The Income-tax Officer disallowed the amounts holding that the payment was not for the purpose of business and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) which specifically allows interest to be deducted in respect of capital borrowed for the purpose of business or profession and submitted that in the above section, though the supplier of machinery and the financier is one and the same, the assessee had to pay interest on the amount borrowed. Therefore, his case is squarely covered by section 36(1)(iii) of the Income-tax Act. It was, alternativel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of business and under these circumstances learned counsel submitted that in the alternative the assessee is entitled for the benefit of section 37(1) of the Act. We are in agreement with the submission made by learned counsel for the assessee and we hold that the assessee is entitled for deduction of the interest in computing the income. With this observation the reference is answered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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