COMMISSIONER OF INCOME TAX Vs. SUNDARAM CLAYTON LIMITED

JUDGEMENT

(1.) THE brief facts leading to these references as follows : The assessee is a company. In the previous year relevant to the asst. year 1976 -77, the assessee purchased a house property called "West Side House" on 29th Aug., 1969, for a sum of Rs. 9,07,509. The funds for the purchase came as a loan from a bank. The assessee claimed deduction of interest paid on the borrowed funds. The ITO disallowed the deduction on the ground that the property was neither used for the purpose of business nor let out during the previous year. This was confirmed on appeal. On further appeal, the Tribunal found that one of the businesses of the company was investment in house property and, therefore, the purchase was part of the assessee's business. The Tribunal also found that after the purchase, the property was remodelled and in the next year two -thirds were let out to M/s Wheels India Limited and one -third was used for the company's business as office premises. The Tribunal came to the finding that the money borrowed for the purchase of the property was only for the purpose of business and, accordingly, allowed the deduction of the interest on the money borrowed.

(2.) AT the instance of the Revenue, the following question has been referred :

(3.) IN the circumstances, we answer the question accordingly with costs of Rs. 500.