Dipak Kumar Sen, J. - (1.) The facts found and/or admitted in these proceedings may shortly be stated as follows : Messrs. J. K. Industries (P) Ltd., Calcutta, the assessee, purchased a plot of land measuring about 20 cottahs on Chowringhee Road, Calcutta, on the 28th November, 1960, at a cost of Rs. 6,13,013 pursuant to a resolution of its board of directors dated the 24th August, 1960. For the aforesaid purpose, the assessee borrowed a sum of Rs. 4,50,000 from the Hindusthan Commercial Bank Ltd. In the assessment years 1961-62 to 1964-65, the relevant financial years being 1960-61 to 1963-64, the assessee claimed deduction of the interest paid to the said bank against the aforesaid loan each year as also municipal tax paid on the land for the purpose of computation of its business profits. The assessee contended that its object in purchasing the said land was to construct a multistoreyed building where it could set up its own office as also the offices of several companies managed by it. In the assessment year 1961-62, i.e., accounting year 1960-61, the assessee claimed a further deduction of Rs. 9,206, allegedly incurred as renovation expenses in respect of its office premises which included the cost of panelling the walls with plywoods, cost of a notice board and book case and the cost of installing the said book case and a safe.
(2.) In the assessment year 1961-62, the ITO allowed the claim of the assessee in respect of the interest paid to the bank as also the municipal tax paid in respect of the said land but disallowed the assessee's claim for renovation on the ground that the expenses incurred were capital in nature. On appeal, the AAC gave notice to the assessee and the municipal tax should not be disallowed (sic). The AAC found that between the assessment and the appeal the assessee had not taken any steps in furtherance of its purported objective and the scheme of the assessee to have a multistoreyed building was not even in a blue-print stage. He held further that, even if the avowed object of the assessee was accepted, it followed that the assessee had acquired an investment mainly to derive income from property, and, therefore, the interest paid to the bank and the municipal tax paid could not be deducted as having been incurred for the purpose of the business of the assessee. He disallowed the deductions claimed for the interest as also for the municipal tax in all the assessment years. On the claim for deduction of renovation expenses, the AAC allowed an estimated amount of Rs. 4,000.
(3.) The assessee preferred a further appeal before the Income-tax Appellate Tribunal. The Tribunal found, inter alia, that : (a) The expenses in question, i.e., the interest paid to the bank and the municipal tax paid had, admittedly been incurred in the course of the carrying on of the assessee's existing business. (b) The primary object for the proposed construction of the multi-storeyed building was to house the office of the assessee and those of the managed companies. (c) The assessee had refused accommodation to the State Bank of India which wanted to hire the ground floor of the proposed building.;