( 1 ) SECTION 34 of the Indian Income-tax Act, 1922, which has been interpreted by the Supreme Court and by different High Courts in India in a number of cases, still remains a rich germinating ground for forensic arguments. One such argument confronts us in this reference.

( 2 ) THE circumstances in which this reference has been made are hereinafter related in brief.

( 3 ) THE assessee, Messrs. Kalyanji Mavji and Co. , is a registered firm. The year of assessment, with which we are concerned in this reference, is 1956-57, corresponding to the accounting year being the Gujrati Diwali year 2011. The original assessment for the year in question was completed, on February 20, 1957, on a total income of Rs. 7,44,551, after having allowed deduction of a sum of Rs. 43,116 being interest paid by the assessee on borrowed money. This assessment was reduced by the Appellate Assistant Commissioner by a sum of Rs. 9,200, by his order dated July 3, 1958.

( 4 ) IN the course of the assessment proceedings for the year 1958-59, the Income-tax Officer discovered that the assessee's claim for payment of interest on money said to have been borrowed for the purpose of business was not