Y.R. Meena, J. - (1.) In compliance with our direction in an application under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following question along with the statement of the case for our opinion : "Whether the Tribunal misdirected itself in law in admitting that the unpaid sale price could be treated as borrowed capital within the meaning of Clause (vi) of Sub-section (1) Section 24 of the Income-tax Act, and in that view whether the Tribunal was justified in holding that the assessee was entitled to deduction of all interest paid to the vendor company on the balance of purchase price as (well as ?) interest paid to Badri-das Keshav Prosad on such sum borrowed subsequently for payment of principal sum of unpaid purchase price to the vendor company ?"
(2.) The assessee had filed the return on June 19, 1980. In the return the assessee claimed a deduction of Rs. 2,55,400 paid to Badridas Keshav Pro-sad which was paid as interest to Badridas Keshav Prosad. The Income-tax Officer has allowed interest only on capital borrowed initially for the purpose of acquiring the house.
(3.) In appeal, the Commissioner of Income-tax (Appeals) has directed the Income-tax Officer to allow deduction in respect of interest on the monies borrowed from Badridas Keshav Prosad, which had been utilised to pay the mortgagee together with interest thereon to the vendor company.;