Deductibility of interest under section 57(iii) upheld where the share allotment had not yet occurred.

Interest paid to Mercantile Credit Corporation was claimed as deductible expenditure under section 57(iii) on the basis that it was incurred for earning income, even though the shares were not allotted and no income had yet arisen. The Court treated the referred questions as covered by an earlier decision relied on by the Revenue and answered the reference accordingly, holding the issue in favour of the assessee and against the Revenue.

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Issues: Whether interest paid to Mercantile Credit Corporation was allowable as expenditure under section 57(iii) of the Income-tax Act, 1961, notwithstanding that the shares were not allotted and no income had yet arisen.

Analysis: The questions referred were treated as covered by an earlier decision of the Court relied on by the Revenue, and the reference was answered on that basis without the need for further hearing.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

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