Deductibility of interest on borrowed funds under a broader business-purpose provision justified certification for Supreme Court appeal.

A certificate for appeal to the Supreme Court was granted on the deductibility of interest paid on borrowed funds used to pay income-tax and make annuity deposits. The Court noted that the proposed appeal involved section 36(1)(iii) of the Income-tax Act, 1961, whose business-purpose language is broader than section 57 and was not considered in the earlier Supreme Court ruling relied on. It also took account of the fact that identical questions had already been certified in a connected matter. On that basis, the Court treated the case as fit for appeal.

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Issues: Whether a certificate for appeal to the Supreme Court should be granted on questions concerning the deductibility of interest paid on borrowed funds used to pay income-tax and to make annuity deposits.

Analysis: The application raised questions not only under section 57 but also under section 36(1)(iii) of the Income-tax Act, 1961. The Court noted that the Supreme Court's earlier ruling on section 57 did not consider the distinct language of section 36(1)(iii), under which interest on capital borrowed for the purpose of business is deductible. The Court held that the expression relating to business purpose is wider than the expression governing expenditure for earning income from other sources, and also considered that a certificate had already been granted on identical questions in an earlier connected matter.

Conclusion: The Court granted the certificate and held that the case was fit for appeal to the Supreme Court.

Ratio Decidendi: Where a proposed appeal raises a question under a different deduction provision having materially wider language than the provision already considered by the Supreme Court, and identical questions have previously been certified, a certificate for appeal may be granted.

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