R.K.Gulati, J. - (1.) Through this application under Section 256(2) of the Income-tax Act, 1961 (for short, "the Act"), the Commissioner of Income-tax has desired that the Income-tax Appellate Tribunal, Bench 'B', New Delhi, be directed to refer the following question for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in holding that the liability of interest payable to the Allahabad Bank, amounting to Rs. 73,414, was allowable?"
(2.) We have heard learned standing counsel for the Revenue. None has appeared for the assessee despite service of notice.
(3.) The dispute pertains to the assessment year 1983-84. During that year, the assessee enjoyed income from letting of godowns as one of the sources of its income. In computation of its taxable income, the assessee sought a deduction of Rs. 73,414 being the amount of interest payable to the Allahabad Bank on the borrowing invested in the construction of the godowns. The Income-tax Officer assessed the rental income from the godowns under the head "Profits and gains of business or profession". He considered the admissibility of the claim for deduction under Section 36(1)(iii) of the Act and disallowed the same on the grounds, inter alia, that, as the assessee had not maintained books of account, it was not entitled to take the benefit of the mercantile system of accounting and the claim for deduction could not be allowed on accrual basis. Another ground given was that the assessee had advanced certain interest-free loans to its sister concerns and thereby used the borrowing indirectly for extra-commercial considerations. On these reasonings, it was held that the claim made by the assessee was inadmissible.;