D.K.SETH, J. - (1.) THIS appeal, under Section 260A of IT Act arising out of the order dt. 18th Jan., 1999, passed by the Tribunal, A Bench, Calcutta, in ITA No. 1422/Cal/1993 in respect of asst. yr. 1989 -90, was admitted on the following grounds : 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest on borrowed capital to the extent it was invested in immovable properties in question was not allowable as business expenditure under Section 36(1)(iii)/37(1) of the IT Act, 1961, and whether the finding of the Tribunal is perverse ?' Appellant's submission
(2.) THE learned counsel for the appellant contended that the Tribunal's finding was perverse having regard to the facts and circumstances of the case. He pointed out the perversity, leading us through the materials placed before this Court. The immovable property was purchased for the purpose of business of the assessee who had already commenced the business. The interest paid on the borrowed capital for acquiring the immovable property, as an asset of the assessee, is a revenue expenditure. The business in real estate had commenced as soon the property was purchased and taken delivery, of. It continues and steps into the second stage as soon construction was started. Therefore, the interest paid on the borrowed capital is admissible to be deducted under Section 36, Sub -section (1), Clause (iii) of the IT Act, 1961. The rejection of the account on the ground that it was shown as advance against immovable property is immaterial. The assessee has its right to maintain his account in its own system. It is the nature and character of the account that has to be looked into for the purpose of imposing tax liability under the Act. The finding of the Tribunal is not a finding of fact but an inference drawn on the basis of the fact found. As such, it is a question of law as has been formulated. Though the assessee was carrying on business in shares and other materials, the memorandum of association included in its main object business in real estate. Therefore, the appeal should be allowed on the ground on which it is admitted and the order of the Tribunal should be set aside. 2.1 The learned counsel for the appellant has relied on the decisions in Addl. CIT v. Akkamba Textiles Ltd. : [1979]117ITR294(AP) , Sivakami Mills Ltd. v. CIT : [1979]120ITR211(Mad) , Addl. CIT v. Akkamamba Textiles Ltd. : [1997]227ITR464(SC) , CIT v. Rajeeva Lochan Kanoria : [1994]208ITR616(Cal) , CIT v. Saurashtra Cement and Chemical Industries Ltd. : [1973]91ITR170(Guj) , Sarabhai Management Corporation Ltd. v. CIT : [1976]102ITR25(Guj) , CIT v. Sarabhai Management Corporation Ltd. : [1991]192ITR151(SC) , CIT v. Associated Fibre and Rubber Industries (?) Ltd. : [1999]236ITR471(SC) , Investment Ltd. v. CIT : [1970]77ITR533(SC) , Sutlej Cotton Mills Ltd. v. CIT : [1979]116ITR1(SC) , CIT v. Berger Paints (India) Ltd. : [2002]254ITR503(Cal) , Mehta Parikh and Co. v. CIT (1956) 30 ITR 181, Edwards (H.M. Inspector of Taxes) v. Bairstow and Harrison 36 Tax Cases 207 (HL) Respondent's contention The learned counsel for the respondent, on the other hand, contends that there is nothing to indicate in the P&L; a/c that this property was a stock -in -trade. It was shown in the balance sheet as an advance against immovable property. Therefore, this, cannot be a revenue expenditure. The learned counsel for the respondent further contended that the business has not commenced since there is nothing to indicate in the balance sheet that any business was in progress in respect of the same. He had also pointed out from the memorandum of association that the business in real estate was never carried on. It was only the business in shares that was being carried on. There is nothing in the report of the company or anywhere else that the assessee was carrying on business in real estate. The learned counsel for the respondent had further contended that this is a question of fact and no question of law is involved. He distinguished the decisions cited by the learned counsel for the appellant, and contended that these decisions do not help the appellant. He cited decisions in Challapalli Sugars Ltd. v. CIT : [1975]98ITR167(SC) , CIT v. India Steamship Company Ltd. : [1992]196ITR917(Cal) , Dey's Medical Stores . v. CIT : [1986]162ITR630(Cal) , and Ritz Continental Hotels Ltd. v. CIT : [1978]114ITR554(Cal) in order to support his contention. Appellant's reply
(3.) THE learned counsel for the appellant, however, in reply contended that the four decisions cited by the learned counsel for the respondent has no manner of application in the present case. The decision of CIT v. India Steamship Company Ltd. (supra) is distinguishable on facts. He had also pointed out from the balance sheet that the interest paid on the borrowed capital has been shown in the balance sheet as against capitals and assets. It is an expenditure and, as such, could not be shown in the P&L; a/c. There is no scope of showing business -wise account, as contended, by the learned counsel for the respondent. The learned counsel for the appellant further contended that Companies Act does not provide for inclusion of such statement in any of the statement or report of the company. Therefore, the contention of the learned counsel for the respondents should not be given much importance. The principle ;