Judgment

KHANNA, J.:- Appeal No. 1353 of 1970 on certificate is directed against the judgment of Andhra Pradesh High Court whereby the High Court answered the following question on reference made to it under Section 66 (1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) against the assessee and in favour of the revenue:

"Whether the interest payment of Rs. 2,38,614/- represents an element on the actual cost of the machinery, plant etc., to the assessee and as such depreciation and development rebate are admissible with reference to this amount also ?"

2. The matter relates to the assessment year 1959-60, the corresponding accounting year for which ended on June 30, 1958. The assessee is a public limited company engaged in the manufacture and sale of sugar. The company went into production on January 22, 1958. The assessee company had borrowed considerable sum of money from the Industrial Finance Corporation of India for the installation of machinery and plant. During the relevant year and for the period prior to the commencement of its business the assessee paid Rs. 2,38,614 as interest. The case of the assessee is that the payment of interest added to the cost