P.P.S. JANARTHANA RAJA, J.

1. The revenue has come on appeal as against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, dated 24.06.2004 made in ITA Nos.79 and 80/Mds/1998.dated 06.04.2004 for the assessment years 1991-1992 and 1992-1993 respectively, raising the following substantial question of law.

"Whether in the facts and circumstances of the case, the Tribunal was right in holding that the interest paid on the loan availed from bank can be allowed as a deduction, when said loan was advanced to the Managing Director without charging any interest?"

2. The assessee is a company in which public are not substantially involved. The assessee is engaged in the business of manufacturing and sale of maida, sooji and wheat items. The relevant assessment years are 1991-1992 and 1992-1993 and the corresponding assessment years ended on 31.03.1991 and 31.03.1992 respectively. For the assessment year 1991-1992, the assessee filed a return admitting the loss of Rs.27,29,851/-. The assessing officer processed the same under Section 143(1)(a) of the Income Tax Act. Later, it was found in the course of the assessment proceedings that the assessee had entered into an ag