SAKTHI ESTATES Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE only question raised before the Tribunal was regarding the extent to which interest should be allowed as a deduction for the assessment year 1987-88. THE assessee had claimed deduction in the sum of Rs. 8,10,846.94, but the Assessing Officer allowed the deduction of Rs. 94,546.62 under section 5(k) of the Tamil Nadu Agricultural Income-tax Act, 1955. He allowed a further sum of Rs. 3,84,737.67 under section 5(e) of the Act. THE assessee has come up in revision regarding the amounts disallowed by the Assessing Officer, which disallowance has been affirmed by the Appellate Assistant Commissioner and by the Tribunal.

(2.) THE assessee contended before the Tribunal that what cannot be allowed under section 5(k) would be allowed under section 5(e). This argument is wholly untenable. THE special provision is section 5(k). To the extent interest claimed is covered by that section having regard to the purpose of borrowing it is excluded from section 5(e). What has been disallowed because of this ceiling in section 5(k) cannot be allowed under section 5(e). THE other contention that had been put forth was that section 5(k) is limited to interest paid on borrowals of the previous year only, and does not cover interest paid on amounts borrowed in earlier years. This argument has been rejected and in our opinion rightly by the Tribunal. Section 5(k) does not stipulate that the borrowing in respect of which interest has been paid should have been effected in the previous year, nor does it require that the expenditure from that borrowing should also have been effected in the previous year in order to entitle the assessee to claim deduction for interest paid on such borrowings. Interest paid on borrowings made in earlier years for the purposes covered by section 5(k) has necessarily to be considered under section 5(k) and not under section 5(e). What is to be allowed in one year under section 5(k) cannot get enlarged to a larger sum in subsequent years even when the deductions claimed relate to the same borrowing.