Borrowed-funds interest under agricultural income tax required fresh factual determination before section 5(e) treatment could be applied.

Interest on borrowed funds was examined under section 5(e) of the Tamil Nadu Agricultural Income-tax Act, 1955, against the alternative limit under section 5(k). The legal position was not disputed, but the factual foundation for applying section 5(e) was incomplete because the record did not clearly show that the borrowed money was used on land from which agricultural income was not derived. The description of expenditure as mostly for maintenance was held too vague to support a final factual finding. The matter was therefore remanded to the assessing authority for fresh determination, with liberty to the assessee to produce supporting proof, and the existing orders were set aside.

---

---

Issues: Whether interest on borrowed funds was allowable as a deduction under section 5(e) of the Tamil Nadu Agricultural Income-tax Act, 1955, or whether the claim was governed by the limit under section 5(k) of that Act.

Analysis: The legal position was not in dispute, but the factual basis for applying section 5(e) was not established. The material recorded that the interest expenditure was mostly for maintenance of the estate, yet it did not clearly show that the borrowed money was spent on land from which agricultural income was not derived. The use of the expression "mostly" was also found to be too vague to sustain a final finding on the relevant factual question. In these circumstances, fresh determination by the assessing authority was necessary, with liberty to the assessee to produce supporting proof.

Conclusion: The matter required remand to the assessing authority for fresh disposal in the light of the earlier decisions referred to, and the existing orders were set aside.

---