R.K.Gulati, J. - (1.) This application under Section 256(2) is filed at the instance of the Revenue. The following three questions have been raised in this application : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest on loan of Rs. 20 lakhs was allowable ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the loss of Rs. 17,726 in the concrete unit was allowable ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in holding that the addition of Rs. 1,93,370 made by the Income-tax Officer in valuing the closing stock of barbed wire was uncalled for ?"
(2.) Upon hearing learned counsel for the parties, in our opinion, question No. 1 alone is a question of law and the remaining two questions are concluded by findings of fact and do not give rise to any question of law.
(3.) The brief facts relevant to the first question are these : The assessee was following the mercantile system of accounting.. Out of the sums debited to the profit and loss account under the head "Interest payable to the State of U. P.", the Income-tax Officer disallowed a sum of Rs. 1,80,000 being the interest on a loan of Rs. 20 lakhs which the assessee had obtained from the State Government. The disallowance was made because, admittedly, the terms and conditions as also the stipulation regarding the rate of interest in respect of the said loan were still unsettled when the previous year relevant to the assessment year in question was ended. However, the assessee based its claim on the footing that, in respect of another loan of Rs. 10 lakhs taken from the State Government, it was paying interest at 9% and presumably it would be required to pay a similar rate of interest on the loan of Rs. 20 lakhs also. The Income-tax Officer did not agree with the assessee. He held that there was no accrued liability in respect of the disputed amount entitling the assessee to deduction of the amount in the computation of its total income.;