COMMISSIOMER OF INCOME TAX Vs. ABDUL GAFOOR

JUDGEMENT

(1.) The question raised in the appeal filed by the revenue is whether the Tribunal is justified in allowing deduction of loss claimed by the assessee by way of discount in bidding kuries against business income. We have heard standing counsel appearing for the appellant and counsel appearing for the respondent-assessee.

(2.) The assessee is engaged in business in iron and steel. During the previous year, the assessee bid various kuries to raise funds which led to loss to him. The loss arising in the bidding of kuries at discounted price was claimed as deduction in the computation of business income under Section 36(1)(iii) of the Act. The assessing officer held that loss not being interest on borrowed funds is not an allowable deduction under Section 36(1)(iii) of the I.T. Act.

(3.) Even though the first appellate authority rejected the claim, in second appeal, the Tribunal allowed it by holding that but for the amount raised from chitty, the assessee would have had borrowed funds leading to payment of interest. Therefore according to Tribunal, the loss suffered in chitty is equal to the interest which is eligible for deduction under Section 36(1)(iii) of the Act.