Both the orders are challenged in this appeal.
The original assessment for the years 1972 73 was made on 28.2.1973 determining the loss as Rs.
1999 1 SCR 375 The following Order of the Court was delivered The respondent assessee is a private limited companypany.
While making the assessment for the assessment year 1974 75, the Income Tax Officer numbericed that the assessee had included a numbere in the schedule of fixed assets appended to its balance sheet as on 31.3.1973 and that numberdepreciation had been made for unused rubberised machinery valued at Rs.
Similarly, for the year 1973 74, in the original assessment deduction was allowed for similar interest paid by the assessee.
Similar application was filed for the year 1974 75.
The Revenue applied to the High Court under Section 256 2 for directing the Tribunal to make a reference to it on the following question Whether on the facts and in the circumstances of the case the Tribunal is justified in law in holding that the interest paid by the assessee on loans taken from the bank for the purchase of machinery, which was never used in the assessees business, is an allowable deduction in companyputing the total income of the assessee for the assessment year 1972 73 and 1973 74.
The assessment was re opened and fresh assessment orders were passed by the I.T.O. rejecting the claim of deduction made by the assessee.
That order was companyfirmed on appeal by the Appellate Assistant Commissioner and when the matter was taken to the Tribunal, the latter took the view that the machinery being business asset, the interest paid on the amount borrowed for the purchase of such machinery would certainly be an allowable deduction.
A sum of Rs.
Hence, the Income Tax Officer held that such machinery had number been used for the business of the assessee.
78,500 claimed as interest paid by the assessee on amounts borrowed for purchase of machinery was allowed as a deduction.
78,823.
4,80,000.
Consequent ly, the Tribunal upheld the claim of the assessee and permitted the deduc tion being made.
Consequently, the I.T.O. took the view that the assessee was number entitled to claim deduction for the interest paid by him in all the three assessment years.
