Deb, J. - (1.) This is a reference under Section 256(1) of the I.T. Act, 1961, It relates to the assessment of 1966-67 and the question before us is as follows : "Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 67(3) of the Income-tax Act, 1961, the Tribunal was right in holding that the interest of Rs. 79,609 was an allowable deduction in computing the share of the assessee in the income of the firm, M/s. Soorajmull Nagarmull ?"
(2.) The assessee is au HUF. The assessee borrowed Rs. 79,609 and invested the said amount with M/s. Soorajmull Nagarmull, a firm in which the assessee was a partner. M/s. Soorajmull Nagarmull utilised this amount for payment of its taxes.
(3.) In the assessment proceedings the ITO held that the interest paid by the assessee on the aforesaid amount was not a deductible expenditure on the ground that M/s. Soorajmull Nagarmull had utilised this amount for payment of its taxes.;