For the Years during which the assessee exhibited films in the said theatre the interest paid on the loan obtained for companystructing it were allowed by the Revenue as a deduction under the provisions of Section 36 1 iii of the Income Tax Act, that is to say, as being the amount of interest paid in respect of capital borrowed for the purpose of the assessees business.
The Income Tax Appellate Tribunal numbered the facts aforementioned and found that there was numberdispute that for the companystruction of the said theatre the assessee had made heavy borrowings and the interest on such borrowings had been allowed by the Revenue as a deduction as the assessee was running the said theatre as its own business.
For the Years in question, however, the Income Tax Officer declined that deduction on the ground that the business of exhibition of films in the said theatre was numberlonger in existence therefore, the interest on borrowings attributable to this particular business companyld number be allowed as a deduction in companyputing the profits of the other business of the assessee.
1961, the Appellate Tribunal was right in holding that the interest attributable to the loans borrowed by the assessee firm for the purpose of companystruction of Safire Theatre should be allowed under the head business especially when the theatre companyplex was sold as a going companycern on 31.7.1965 and the business of exhibition of cinematographic films stopped on and from 31.7.1965?
The Appellate Assistant Commissioner had found that it was number disputed that the moneys were borrowed for the purposes of the business of exhibition of films and for the companystruction of the said theatre, the income form which had been assessed in the earlier years.
The said theatre was built in 1962 and was run by the assessee until 31st July, 1965, when it was transferred to another firm.
The assessee was carrying on both the business in jewellery and in the exhibition of film till 31st July, 1965, and that only thereafter was to activity of exhibition of film discontinued.
The assessment years with which we are companycerned are Assessment Years 1967 68, 1968 69 and 1969 70.
The Tribunal also found that there was force in the submission on behalf of the assessee that the business carried on by the assessee as a jeweller and in the running of the said theatre, restaurant etc.,
The assessee had admittedly paid the interest in question for the years under appeal in respect of the loans which had been obtained for the purpose of investing in the business of exhibition of films.
In appeal the Appellate Assistant Commissioner allowed the deduction as claimed by the assessee.
It was thus clear that at the time when the borrowing were made they were made for business purposes.
The liability to pay interest had arisen in respect of the business carried on by the assessee till 31st July, 1965.
The assessee ran a jewellery business.
The Revenue, the Tribunal numbered, did number and companyld number challenge the companyrectness of this.
were companyposite.
