COMMISSIONER OF INCOME TAX Vs. NATARAJAN K

JUDGEMENT

(1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following two questions of law for the decision of this court:

(2.) WE heard counsel. Counsel for the Revenue argued that payment of interest was for infraction of the law and so the deduction should not have been permitted. WE are unable to accept this plea. In identical circumstances, in the decision CIT v. T.M. Chacko and Partners [1978] 115 ITR 40, this court, held that the payment of interest was only under a contract. The Supreme Court had also taken the same view in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429. The finding of the Tribunal that the payment of interest was only under a contract is not challenged. The said finding is based on material. WE have no reason to depart from the said finding. On this basis, it has to be held that the payment of interest was not for infraction of any law. It is a permissible deduction. WE answer question No. 1, referred to us, in the affirmative, against the Revenue and in favour of the assessee.