TMI Blog1996 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... d as R. As. Nos. 102 to 104/(Ind) of 1994 for statement of the case and reference of the questions to this court for opinion. On these applications, the Tribunal stated the case and referred the questions, as extracted below, for consideration : " (1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the interest paid/payable, on the funds borrowed and utilised for acquiring and erecting the plant and machinery of its undertaking at Village Sejwaya, District Dhar, is allowable as a revenue expenditure ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the assessee's busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the deduction claimed was not allowable. The action of the Assessing Officer was upheld in appeal by the Commissioner of Income-tax (Appeals). Thereupon, the assessee carried the matter via appeal before the Tribunal. It was contended on behalf of the assessee that the new unit was part and parcel of its existing business and the borrowed funds had been utilised in the same business and, therefore, the interest paid/payable was required to be allowed as deduction under section 36(1)(iii) of the Income-tax Act, 1961. It was thus contended that the business was not new but an expansion of existing business. The Tribunal by its order dated April 9, 1986, demolished the order and directed reconsideration of the question as in the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of business or profession ". It contains particulars of income chargeable to income-tax. Section 36 catalogues the deductions provided for in computing the income referred to in section 28. Clause (iii) of sub-section (1) of section 36 permits deduction of : " The amount of the interest paid in respect of capital borrowed for the purpose of the business or profession. " It is in this context that the assessing authorities were required to scrutinise whether the loan, i.e., capital was borrowed from the M. P. F. C. for the purposes of the business of the assessee and, if so, whether the amount of the interest paid in respect of capital assumed the character of permissible deduction in terms of section 36(1)(iii) while doing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal. The Tribunal, on second inning of the litigation, sustained the finding of fact, recorded by the Commissioner of Income-tax (Appeals) on remand, and upheld the direction for deduction of the amount of interest on the linchpin of " purposes of the business " of the assessee. The direction is based on the undernoted facts and features : (i) The business at Sejwaya is in accord with clauses 3 and 5 of the memorandum/articles of association of the assessee-company. (ii) The assessee borrowed a loan from the M. P. F. C. on interest to set up a unit at Sejwaya with a surge of an urge to expand its business and utilised the same, along with, some funds available with it, in purchase and installation of plant and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Kanhiram Ramgopal v. CIT [1988] 170 ITR 41 (MP), tore up tenebrosity and illumined the path. The finding, evidently on a firm foundation, is reached on a proper appreciation of facts. The conclusion so reached does not give rise to referable questions of law. In CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC) and in CIT v. Kotrika Venkataswamy and Sons [1971] 79 ITR 499 (SC), it is held that a conclusion based on appreciation of facts does not give rise to any question of law. Yet the Tribunal resorted to section 256(1) and referred the aforesaid three questions. Luculently, the conclusion that the case stood covered under section 36(1)(iii) and as such deduction was permissible is a question of fact and not of law. The questions d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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