D.K.Seth, J. - (1.) Identical question has been set forth before us for decision in this reference under Section 256(2) of the Income-tax Act 1961, and the appeal under Section 260A thereof. Therefore, both these cases were taken up together and have been addressed by learned counsel for the respective parties simultaneously. The assessee being one and the same and it related to only two different assessment years consecutively, we have taken up the matter together and propose to dispose of the same by one common judgment.
(2.) The questions that have been set forth in the reference are as follows : "(1) Whether, on the facts and in the circumstances of the case, the amount of interest paid is allowable as a deduction under Section 57 of the said Act while computing the interest income assessed as income from other sources under Section 56 of the Act ? (2) Whether, on the facts and in the circumstances of the case, the hon'ble Tribunal was justified in holding that there was no nexus between the interest expenditure incurred by the applicant and the interest income received by the applicant by investing the surplus amount out of borrowed fund when the said activity was clearly permissible under the memorandum and articles of association of the applicant ? (3) Whether the interest expenditure incurred by the appellant is allowable as a deduction under Section 57 of the Income-tax Act, 1961, while computing the interest income sought to be assessed as 'income from other sources' under Section 56 as expenditure incurred for earning the income ? (4) Whether having regard to the memorandum of association of the appellant and its certificates of incorporation and commencement of business, the transactions relating to borrowing and lending were business operations and the interest paid was allowable as an expenditure incurred for earning the interest income under Section 36(1) (iii) of the said Act."
(3.) Though a little varied expressions have been used in the appeal, these grounds do not make any distinction to obscure the identity of the grounds, which are one and the same.;