Per Dr. V. Balasubramanian, Senior Vice President - In this departmental appeal, the order of the Commissioner (Appeals) is challenged with reference to the deletion of three amounts. The matter is considered seriatim below.

2. The IAC found that the assessee had debited the income and expenditure account with a sum of Rs. 64,649 being interest paid to two parties — Prasad Productions and Shree Laxmi Pictures. The assessee claimed allowance of the interest under section 80V of the Income-tax Act, 1961 (‘the Act’). The IAC disallowed the claim, inter alia, for the reason that the provisions of section 80V were introduced after 1-4-1976. The Commissioner (Appeals) allowed the claim restricting it to Rs. 48,487.

3. The learned counsel for the department has pointed out that even accepting that the borrowings could be regarded for payment of tax, it was not borrowed during the year of account. The money was borrowed earlier and continued to be utilised by the assessee. The dates of the loans were 3-12-1971 and 4-12-71. It was for the assessee to establish that it was the same money which it borrowed that it paid towards tax. Apart, therefore, from the claim being not relevant for the year under appeal, according to the learned, counsel, the borrowing cannot also be related to the payment of tax. For the assessee, it is pointed out that the accounts clearly indicated two borrowings of Rs. 50,000 each on 3-12-1971 and 4-12-1971. On 13-12-1971, a sum of Rs. 74,778 was paid into the Reserve Bank of India towards income-tax. The accounts clearly indicate that this amount could not have been paid but for the borrowals. It is clear, therefore, that the borrowed money was utilised only for tax payment. The interest on this amount was paid during this year and the claim is made because the assessee is following a cash system of accounting.

4. As correctly pointed out by the Commissioner (Appeals), no limitation can be read into the statutory provisions to the effect that the borrowings must be made during the previous year or even after 1-4-1976. In fact, if a stipulation were to be made that interest can be allowed only on amounts borrowed during the previous, year, the provisions themselves might become otiose since interest is generally calculated or paid only after the year or a term. Apart from what the Commissioner (Appeals) has mentioned in his order, the above circumstances also would compel us to support his order on this point.

5. The IAC found that during the year of account, the assessee had entered into agreements with certain producers. The consideration for the professional services rendered by him was in the form of deferred annuities of the four agreements entered into, one relating to Vijay Suresh Combine was through a life insurance policy whereas the agreements with three other parties, Megha Movies for the picture ‘Kinara’, A.R. Productions for the picture ‘Karmayogi’ and Modern Films for ‘Priyatama’ were not through the LIC. The assessee was to get annuity instalments in respect of the latter three agreements of Rs. 16,000, Rs. 32,000 and Rs. 32,000, respectively with 10, 15 and 15 instalments, respectively. The amount paid by the producer in respect of these agreements came to Rs. 95,000, Rs. 1,98,000 and Rs. 2 lakhs, respectively. The assessee did not declare the aforesaid payments as his professional receipts on the ground that the payments represented the purchase price of annuity policies. There was no receipt for the year of account. The IAC found that whereas the agreement with Vijay Suresh Combine involving a single premium on LIC policy in the name of the assessee, came within the norms of the Board’s instructions relating to such payments and was thus not taxable, the other three payments clearly represented taxable income. These other producers had entered into an agreement with a private limited company—Balaji Film Finance & Distribution Co. (P.) Ltd. for carrying on guarantee business. This private compa