COMMISSIONER OF INCOME TAX Vs. KERALA ROAD LINES

JUDGEMENT

(1.) I. T. R. No. 234 of 1997 is at the instance of the Revenue. The questions referred to us are the following :

(2.) I. T. R. No. 310 of 1999 is at the instance of the assessee. The questions referred to us are the following :

(3.) THE assessee claimed that the assessee had to pay a sum of Rs. 4 lakhs as interest to the vendor pursuant to the agreement for sale, and this payment of Rs. 4 lakhs was liable to be deducted as business expenditure. THE Assessing Officer rejected the claim of the assessee holding that the entire expenditure was capital expenditure and, hence, the assessee was not entitled to deduction. On appeal by the assessee, the Commissioner of Income-tax (Appeals) took the view that the interest relatable to 65.57 cents of land which was actually taken assignment of by the assesses itself was relatable to the business expenditure of the assessee and, hence, the assessee was entitled to a deduction of Rs. 57,649. As regards the balance interest paid by the assessee to the vendor, the Commissioner of Income-tax (Appeals) took the view that the same could not be treated as business expenditure and the assessee was not entitled to deduction. THE assessee appealed to the Income-tax Appellate Tribunal. THE Income-tax Appellate Tribunal took the view that since the assessee was only intermediary in the transactions and since the assessee had accounted for the amount realised by the assessee by sale of the building in the property as its business income, the interest paid by the assessee to the vendor can be allowed as business expenditure under Section 37 of the Income-tax Act, 1961. It is in this context that the questions referred to us for decision have to be answered.