Interest on borrowed funds for theatre construction was held deductible as business expenditure, with the addition deleted.

Interest on borrowed funds used to construct a theatre intended to earn business income was allowable as a deduction because the borrowing was for a business purpose and the expenditure was actually incurred. The Revenue's relied-upon authority was treated as factually distinguishable, while the earlier view supporting allowance of such interest was applied. Support was also drawn from other High Court decisions and from departmental acceptance of the earlier year's treatment. The addition was therefore deleted and the deduction was allowed in favour of the assessee.

---

---

Issues: Whether interest paid on borrowed funds utilised for construction of a theatre was allowable as a deduction against business income.

Analysis: The assessee had borrowed funds for construction of a theatre intended to be used for earning income, and the interest expenditure had been actually incurred. The decision relied upon by the Revenue was found distinguishable on the facts, whereas the earlier view supporting allowance of such interest was treated as applicable. The appellate order also drew support from other High Court decisions and the departmental acceptance of the earlier year's view.

Conclusion: The addition was rightly deleted and the interest deduction was allowable, in favour of the assessee.

---