Judgment

Bose J.- This is an assessee s appeal from a judgment of the H. C. at Calcutta delivered on a reference made to it u/s. 66 (1), Income-tax Act.

2. The question submitted for the H. C. s opinion was as follows : Whether in the circumstances of this case, the interest paid by the assessee on debentures was incurred solely for the purpose of making or earning such incomes, profits or gains which are assessable under sub-s. 1 of S. 12.

3. The assessee is a private limited co. which was incorporated on 3-1-1927. It is an investment co. known as the Eastern Investments Ltd. The objects set out in the Memo. of Assocn. are to buy. sell & otherwise deal with shares, securities, bonds & so forth generally. The co. was originally formed for acquiring, holding & otherwise dealing with shares and Government securities which had previously belonged to one Lord Cable. The share capital of the Co. at the date of its incorporation was 250 lacs & consisted partly of preference shares & partly of ordinary shares. Of these Lord Cable held the majority including the 50,000 ordinary shares of the face value of Rs. 50,00,000 with which we are here concerned. The rest of the share capital was