COMMISSIONER OF INCOME TAX Vs. EXPANDED METAL MANUFACTURERS

JUDGEMENT

(1.) Under Section 256(1) of the Income-tax Act, 1961, the Tribunal has stated the following question at the instance of the Revenue :

(2.) The assessee is a registered firm. It was engaged in the business of expanding of iron metal by mechanical process and its supply. It started a new business of manufacture of rubber products under the name and style of M/s. Lokesh Rubber Industries. For that purpose, it raised a loan of Rs. 1,56,452. During the accounting year relevant to the assessment year concerned herein (assessment year 1976-77), the rubber factory did not work. The assessee claimed deduction for the amount paid by way of interest on the said loan which was disallowed by the Income-tax Officer. On appeal, however, the Appellate Assistant Commissioner allowed the deduction which has been confirmed in appeal.

(3.) The contention of, the Department is that the interest should go along, with the capital expenditure and must constitute "actual cost" for the purpose of development expenditure, etc. It says the said interest cannot be given deduction out of the income derived from the metal unit.