Business deduction for loan interest upheld where property was acquired for business purposes despite no actual use in year.

Interest on a bank loan taken to acquire house property for a company's business was treated as deductible business expenditure, even though the property was not put to actual business use in the relevant year. The Tribunal's finding that the acquisition was for business purposes was accepted as a finding of fact, and the absence of immediate use did not alter the business character of the borrowing. The principle applied was that expenditure incurred for raising a loan is allowable on revenue account as business expenditure, regardless of whether the borrowed funds are ultimately used for capital outlay or revenue spending. The deduction was therefore allowed and the reference was answered in favour of the assessee, against the Revenue.

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Issues: Whether interest on the bank loan taken for purchase of the house property was deductible as business expenditure where the property was acquired for the assessee-company's business, though not put to actual business use during the relevant year.

Analysis: The Tribunal's finding that the acquisition of the property was for the business of the assessee-company was accepted and was not specifically challenged as a finding of fact. The objection that the property had not been actually used in the relevant previous year did not displace the character of the borrowing as one made for business purposes. The legal principle applied was that expenditure incurred for raising a loan is allowable on revenue account as business expenditure, irrespective of whether the borrowed funds were applied for capital outlay or revenue disbursement. The subsequent letting out and business use of the property also supported the assessee's business intention.

Conclusion: The interest on the loan was allowable as a deduction and the answer to the referred question was in the affirmative, against the Revenue.

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