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Issues:
1. Allowance of interest on loan and preliminary expenses under section 35D for assessment year 1983-84. Analysis: The appeal by the Revenue for assessment year 1983-84 challenged the order passed by the Commissioner of Income-tax (Appeals)-X, New Delhi. The only ground raised in the appeal was regarding the direction by the CIT (A) to allow interest on a loan amounting to Rs. 9,452 and preliminary expenses of Rs. 1,000 under section 35D. The assessee, an investment company, claimed these amounts as deductions for the assessment year ending on 31-10-1982. The Assessing Officer initially ignored the claimed loss due to no business being conducted. However, the CIT (A) held that the business of the assessee commenced when a loan was taken on 26-6-1982, allowing the deductions based on the Gujarat High Court decision in a similar case. The Departmental Representative argued that the loan conversion into share capital on 18-10-1982 marked the actual commencement of business, as prior to that, the raised loans were not utilized for business purposes. The counsel for the assessee contended that the business was set up when the loan was taken, relying on precedents emphasizing the intent to commence business activities. The Tribunal analyzed the situation, considering the practicalities of an investment company's operations. It concluded that the initial loan taken on 26-6-1982 was a crucial step towards setting up the business, as it was intended for investment purposes. The subsequent utilization of the loan for purchasing shares further supported this intent. The Tribunal distinguished the cases cited by both parties and upheld the CIT (A)'s decision to allow the deductions, rejecting the Revenue's appeal. In summary, the Tribunal determined that the business of the investment company was effectively set up when the loan was raised on 26-6-1982, justifying the allowance of interest and preliminary expenses as deductions. The decision was based on the practical necessities of an investment company's operations and the intent behind the loan acquisition for business purposes. The Tribunal's analysis considered the precedents cited by both parties and upheld the CIT (A)'s decision, rejecting the Revenue's appeal.
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