COMMISSIONER OF INCOME TAX Vs. NATIONAL CHEMICAL INDUSTRIES

JUDGEMENT

(1.) AT the instance of the Revenue, the Tribunal has referred the following question : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the payment of Rs. 73,723 was business expenditure under s. 36(1)(iii) of the IT Act, 1961, when there was no actual capital borrowed for the purposes of the business -

(2.) IN the question, it transpires that by mistake, it is mentioned as s. 36(1)(ii), but it should be read as 36(1)(iii). In the opinion of the Court, the aforesaid question does not arise in the instant case. It is clear from the finding recorded by the Tribunal that the assessee -firm was allotted an industrial plot at Faridabad for Rs. 30 lakhs by the State Government. The price of the plot was Rs. 13,16,480. 20 per cent of the price was payable at the time of allotment and the balance was to be paid in 10 equal instalments carrying an interest of 7 per cent per annum. The interest of Rs. 73,723 was paid by the assessee -firm along with the first instalment. The assessee in his return claimed that the said amount is required to be allowed under s. 37 of the IT Act, 1961, as allowable business expenditure because it was in the nature of the revenue expenditure.

(3.) THE Tribunal, after examining the provisions contained in s. 10(2)(xv) of the IT Act, 1922, which is in pari materia to s. 37 of the present Act, ultimately held as under : "Therefore, we direct that the interest of Rs. 73,723 should be allowed to the assessee as revenue expenditure."