M. Jagannadha Rao, J.

( 1 ) THIS is a reference under Section 256 of the Income Tax Act,1961 by the Income Tax Appellate Tribunal (Delhi Bench) in respect of the assessment-year 1973-74 for which the relevant previous year ended on 31. 10. 1972. The question referred is as follows:

"whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that a part of the borrowing had been directed by the assessee to its non-business purposes and that the assessee is not entitled to claim interest on those borrowings under Section 36 (1) (iii) of the Income Tax Act,1961?"

( 2 ) THE petitioner is a partnership concern running a cinema called Regal Theatre in Delhi as also a restaurant. The dispute relates to disallowance of deduction towards interest in a sum of Rs. 23,166 out of a total claim for interest-deduction in a sum of Rs. 26,108.

( 3 ) THE Income-tax Officer in his order dated 20. 10. 73 noticed that the return filed by the assessee was of income of Rs. 2,67,617 and assessed the firm to a net income of Rs. 1,90,741 and demanded a tax of Rs. 64,442.

( 4 ) IN regard to claim for deduction towards interest in a total amount of Rs. 26,108, the Of

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