N.K. Sodhi, J. - (1.) This order will dispose of five connected IT Cases Nos. 22, 23, 166 of 1993 and 149 and 150 of 1992 pertaining to the same assessee though in regard to different assessment years. The questions of law and fact are common in them and they can be conveniently disposed of together 2. During the asst. yr. 1983 -84, the assessee had taken a loan of Rs. 1,75,000 which was utilised by it for the purchase of 4% non -cumulative preference share and it claimed a deduction of interest on these borrowings at 16%. Accordingly, a sum of Rs. 29,277 was claimed as a deduction from its income for the assessment year. The assessment was completed under s. 143(3) of the IT Act, 1961 (for short, the Act) on 24th Dec., 1985 accepting the income returned by the assessee and the deduction of interest as claimed was allowed. Later on, it came to the notice of the Department that the assessment so framed by the ITO was erroneous and prejudicial to the Revenue within the meaning of s. 263 of the Act. A notice under s. 263(1) of the Act was issued and served on the assessee requiring it to show cause why the order of the ITO be not set aside. After hearing the assessee, the CIT (Central), Ludhiana as per his order dt. 29th March, 1988 came to the conclusion that ITO while framing the assessment did not apply her mind to the reasonableness or otherwise of the interest claimed by the assessee in respect of the borrowings made from the family concerns/close relations at a higher rate of interest and investment of such borrowings in shares of closely related companies at a fixed nominal return for all time to come. He, therefore, concluded that the order of the ITO was erroneous and prejudicial to the interest of Revenue. According to him, the reasonableness or otherwise of the claim on various accounts is necessarily to be looked into by the assessing authority which had not been done in the present case. Consequently, the order of assessment was modified to the extent that the ITO would restrict the allowance of interest on the borrowings to the extent of the expected return on the investments made out of such borrowings and disallowed the balance interest as claimed by the assessee. The matter was remitted back to the ITO for passing the necessary orders in accordance with the directions issued by the CIT. The assessee challenged the order of the CIT in appeal before the Tribunal and the latter by its order dt. 9th Aug., 1991 allowed the appeals pertaining to the asst. yrs. 1983 -84 and 1984 -85. The Department filed applications before Tribunal under s. 256(1) of the Act for referring the question of law which according to it arose from its order for the opinion of this Court. The applications for both the assessment years were rejected on the ground that no question of law arose and consequently, the Department filed ITC 149 and 150 of 1992 in this Court which are being disposed of by this order. 3. However, against the order of assessment passed by the assessing authority in pursuance of the directions issued by the CIT, the assessee filed an appeal before the Dy. CIT(A), Ludhiana. The appeals pertaining to the asst. yrs. 1983 -84, 1984 -85, 1986 -87, 1987 -88 and 1988 -89 in which common questions of law and fact had arisen were dismissed by the appellate authority as per its order dt. 11th July, 1991. Feeling aggrieved by the orders of the Dy. CIT(A), the assessee preferred appeals before the Tribunal for the various assessment years in which similar questions of law and fact arose and in view of its earlier decision dt. 9th Aug., 1991, the present appeals were also allowed on 13th Feb., 1992. The reference applications filed by the Department under s. 256(1) of the Act were dismissed and, therefore, ITC 22, 23 and 166 of 1993 were filed in this Court for a mandamus to the Tribunal directing it to refer the question of law which according to the Department arose from its order dt. 13th Feb., 1992. 4. In spite of notice having been served on the assessee, no one appeared on its behalf. 5. We have heard Mr. R. P. Sawhney, Senior Advocate on behalf of the Department and perused the impugned orders passed by the Tribunal as also by the appellate authorities. In our opinion, a question of law does arise from the facts and circumstances of the present case and that the Tribunal was in error in holding to the contrary. Consequently, we allow the applications filed under s. 256(2) of the Act and direct the Tribunal to state the case and refer the following question of law for decision of this Court in ITC 22, 23 and 166 of 1993 : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing interest as claimed by the assessee at a higher rate on borrowings to the nominal fixed expected return on investments made in purchase of shares out of such borrowings from family concerns." In ITC 149 and 150 of 1992, the Tribunal is directed to state the case and refer the following question of law for the decision of this Court : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order passed by the CIT (Central), Ludhiana restricting the allowance of interest claimed at higher rate on borrowings to the nominal fixed expected return on investments made out of such borrowings from family concerns.";