Commissioner of Income Tax vs Tamil Nadu Industrial Development Corporation Ltd.

Ramanujam, J.—The following question has been referred to this court by the Income Tax Appellate Tribunal at the instance of the Revenue

:

Whether, on the facts and in the circumstances of the case and having regard to the provisions of Section 57(iii) of the Income Tax Act, 1961, the

Appellate Tribunal is right in holding that the assessee is entitled to the deduction of Rs.4,94,082 being the interest on moneys borrowed from the

Government of Tamil Nadu and by issue of debentures against the interest income of Rs. 3,24,427 being interest on short-term deposits with the

banks ?

An identical question came up for consideration before this court in two earlier decisions one in ADDITIONAL COMMISSIONER OF

Income Tax, MADRAS-I Vs. MADRAS FERTILISERS LTD., and the other in T. C. No. 611 of 1979 judgment dated April 19, 1984

Commissioner of Income Tax Vs. Seshasayee Paper and Boards Ltd., , wherein this court has held that the interest paid on its borrowal for the

purpose of the business is deductible from the interest earned on its investments made out of the borrowed funds, and that question was answered

in the negative in the said cases. Following the decisions rendered in those cases, we answer the question in this case in the negative and in favour

of the Revenue.

No costs.