Ramaswami, J.

1. This reference is made at the instance of the assessee by the Income-tax Appellate Tribunal under Sec. 66(1) of the Indian Income-tax Act.

2. The first objection relates to a sum off Rs. 10,497 which the Income-tax authorities included as taxable income for the assessment year 1947-48. The assessee owned textile mills known as Navsarj Mills which had closed down several years past Babu Gokhulchand who was the proprietor of the firm Sital Prasad Kharag Prasad managed the textile mills on behalf of the assessee. Gokhulchand. sold away the machinery of the mills and a sum of Rs. 13,363 was due from Gokulchand to the Maharaja on this account. During the accounting year the Maharaja realised as a result of litigation between him and Gokulchand. a sum of Rs. 25,530 which included the principal, law charges expenses as also interest. Out of the amount of Rs. 25,530 realised by the assessee the Income-tax Officer calculated the interest to be Rs. 10,497. The assessee claimed that this amount should be treated as accretion to capital because the mill business having been closed : the sale proceeds of the machinery could not be profits arising from that business. The