Pathak, J.:— The assessee, Smt. Indermani Jatia, was the widow of Seth Ganga Sagar Jatia of Khurja. She carried on money-lending business and other businesses, and derived income from investment in shares, properties and businesses. The capital assets and income in respect of the different sources of income were incorporated in common sets of books.

2. At the beginning of the accounting year, relevant to the assessment year 1957–58, the capital account showed a net credit balance of Rs. 26,31,496. During the year, it is said, she donated a sum of Rs. 10 lakhs for the setting up of an engineering college at Khurja to be named after her husband. The amount was debited to the capital account and corresponding credit was given to the account of the institution. At the close of the accounting year, after debiting the aforesaid sum of Rs. 10 lakhs the capital account showed a net credit of Rs. 15,06,920. The amount actually paid by the assessee during the year of account to the institution was only Rs. 5,50,000. The balance of Rs. 4,50,000 was treated as a debt due to the institution and accordingly the assessee was debited with interest thereon. The assessee had an overdraft account with the Central Bank of India, Aligarh. At the beginning of the accounting year, the amount outstanding on the overdraft was Rs. 2,76,965. Further overdrafts were raised during the year so that at the end of the year the liability of the assessee to the bank stood at Rs. 9,55,460. Among further debits to that account during the year was the aforesaid sum of Rs. 5,50,000 paid to the engineering college on January 7, 1956.

3. In assessment proceedings for the assessment years 1957–58, 1958–59 and 1959–60 the assessee claimed deduction of the interest paid by her to the bank in respect of the aforesaid overdraft account. The assessee contended that she had preferred to draw on the overdraft account of the bank for the purpose of paying the institution and that if she had not done so she would have had to dispose of her shares for the purpose of making such payment. The case was that in order to save the income-earning assets the loan was taken and, therefore, the interest paid should be allowed. The Income-tax Officer rejected the claim, taking the view that the amount paid to the engineering college was not related to any business project. For the assessment year 1957–58 he disallowed Rs. 20,107 representing the interest paid to the bank on Rs. 5,50,000. Similarly, a sum of Rs. 25,470 and of Rs. 18,445, was disallowed as interest for the assessment years 1958–59 and 1959–60.

4. The assessee appealed to the Appellate Assistant Commissioner and the appeals were dismissed. In second appeal before the Income-tax Appellate Tribunal the assessee urged that on October 21, 1955, she had promised a donation of Rs. 10 lakhs to the engineering college and that out of this a sum of Rs. 5,50,000 was deposited in the joint account of the assessee and the District Magistrate, Bulandshahr, on January 7, 1956. The remaining sum of Rs. 4,50,000 was left as a loan with the assessee and the interest accruing on this sum of Rs. 4,50,000 from the date of the initial donation, namely, October 21, 1955, at 6% per annum was to be finally deposited in the account of the engineering college. It was also contended that the amount was kept in trust. The assessee claimed that she was entitled to deduction on account of the interest paid on the overdraft account with the bank in respect of Rs. 5,50,000 and also to the interest accruing on the sum of Rs. 4,50,000 in favour of the engineering college. The former claim was made in respect of all the assessment years 1957–58 to 1959–60 while the latter was made in respect of the assessment years 1958–59 and 1959–60. The Tribunal confirmed the disallowance of the interest claimed in respect of the sum of Rs. 5,50,000, holding that the sum of Rs. 5,50,000 was not paid for a business purpose but as a donation and, therefore, the claim could not be laid under section 10(2)(iii) of the Indian Income-tax Act, 1922. In respect of the interest accruing on the sum of Rs. 4,50,000 in favour of the engineering college, the Tribunal held that no donation of that sum had been made by the assessee, that it was at best a promise by the assessee to the District Magistrate to pay that amount for the purpose of charity and the mere entry in the assessee's own account books crediting the trust, which had not yet come into existence, could not amount to a gift or trust for charitable purposes. Thus, the interest credited to the account of the engineering college was also disallowed. Meanwhile, Smt. Indermani Jatia died and her legal heir, Madhav Prasad Jatia, was substituted.

5. The assessee requested the Tribunal to refer the question concerning the deduction of interest on Rs. 4,50,000 for the assessment years 1958–59 and 1959–60 and accordingly the Tribunal has referred the following question:

“Whether, in the facts and circumstances of the case, the interest credited by the assessee to the account of Ganga Sagar Jatia Engineering College on the sum of Rs. 4,50,000 and accretion thereto was an admissible deduction for each of the years under reference? “, that is reference No. 342 of 1964.

6. The assessee also applied for a reference on the point whether the interest on Rs. 5,50,000 was deductible for the assessment years 1957–58 to 1959–60. The Tribunal declined to make the reference. The assessee then applied to this court under section 66(2) of the Act and, upon the application being allowed, the Tribunal has referred the following question:

For the assessment year 1957–58:

“Whether, in the circumstances of the case, the sum of Rs. 20,107 paid to the Central Bank in respect of the overdraft of Rs. 5,50,000 was allowable as deduction under section 10(2)(iii) or under section 10(2)(xv) of the Indian Income-tax Act, 1922?”

For the assessment year 1958–59:

“Whether, in the circumstances of the case, the sum of Rs. 25,470 paid to the Central Bank in respect of the overdraft of Rs. 5,50,000 was allowable as a deduction under section 10(2)(iii) or under section 10(2)(xv) of the Indian Income-tax Act, 1922?”

For the assessment year 1959–60:

“Whether, in the circumstances of the case, the sum of Rs. 18,445 paid to the Central Bank in respect of the overdraft of Rs. 5,50,000 was allowable as a deduction under section 10(2)(iii) or under section 10(2)(xv) of the Indian Income-tax Act, 1922?”

7. The case of the assessee is that there was an obligation to pay Rs. 10 lakhs to the engineering college and that for the time being she decided to pay Rs. 5,50,000, that it was open to the assessee to pay it from the business assets or to preserve the business assets for the purposes of earning income and instead borrow the amount from the bank. The contention appears to be that the borrowing was made to preserve the business assets. In the first place, there is nothing to show that the assessee would necessarily have had to employ the business assets for making payment of that amount. In the next place, it is where money is borrowed for the purposes of the business that the interest payable thereon becomes an admissible deduction. Here, admittedly, the amount was borrowed from the bank for making payment to the engineering college. Admittedly, it was not a payment directed to a business purpose. The mere circumstance that otherwise the assessee would have to resort to the liquidation of its income-yielding assets does not stamp the interest paid on such borrowing with the character of business expenditure.

8. A similar contention was raised before the Bombay High Court in Bhai Buribhen Lallubhai v. Commissioner of Income-tax [1956] 29 I.T.R 543, 547, 548 Bom... The assessee claimed to deduct under section 12(2) the interest on money borrowed by her for the purpose of meeting household expenses, purchasing jewellery and meeting an advance payment of tax. It was explained that the assessee had the option either of taking the money from her income-yielding fixed deposit and thereby reducing the income, or borrowing money and paying interest on it. It was urged that by borrowing the money she thereby preserved the source of her income and, therefore, the interest on the borrowing was an allowable expenditure. The contention was negatived by Chagla C.J, who, speaking for the court, observed:

“The court is not concerned with the motive of the assessee and what Mr. Mehta in fact asks us to do is to probe into the motive of the assessee. It may be that the assessee's motive was to save her fixed deposit and interest accruing from it and to purchase the jewellery by means of loan borrowed from some person or other. But that consideration is entirely irrelevant. What we are concerned with is the actual action on the part of the assessee and not of the action she could have taken under the circumstances. If she had chosen to purchase this jewellery by withdrawing money from the fixed deposit, then undoubtedly her income would have been reduced and to that extent the tax on that income would also be reduced. But, because she chose to borrow money to buy the jewellery, it does not establish the purpose, namely, that she borrowed money in order to maintain or preserve the fixed deposit or help her to earn interest.”

9. The case was referred to with approval by the Calcutta High Court in Mannalal Ratanlal v. Commissioner of Income-tax. There the assessee had borrowed money for paying income-tax in respect of the preceding years and had paid interest on the loan. He claimed to deduct the amount of interest from his total income in the relevant assessment year. He contended that if he had not borrowed money, he would have been compelled to liquidate part of his income-yielding assets, that the borrowing was for the purpose of maintaining income-yielding assets, and that there was a direct or, at any rate, indirect connection between the income and the expenditure. The learned judges rejected the claim on the ground that the borrowing was not made for the purpose of business at all.

10. Learned counsel for the assessee has placed reliance on Commissioner of Income-tax v. Gopikrishna Muralidhar [1963] 47 I.T.R 469 A.P. but it seems to us that the case is clearly distinguishable. The assessee had made large borrowings for the purpose of his business, and it was found that out of the business fund he had withdrawn amounts for household expenses. It was also found that no particular sum purporting to be borrowed on behalf of the business was spent for household expenses. The Andhra Pradesh High Court allowed the assessee's claim, basing its decision on the circumstance that the amounts which had been borrowed was only for the purpose of the assessee's business, and it observed that if subsequently part of the amounts borrowed was used for personal expenses the assessee could not be deprived of the benefit of deduction under section 10(2)(iii) of the Act. The decision of the Bombay High Court in Bai Bhuriben Lallubhai3 was distinguished on the ground that there the borrowing had been made specifically for meeting the household expenses, such as purchasing jewellery, etc., and not for the purpose of the business.

11. The decision of the Calcutta High Court in Commissioner of Income-tax v. Tingri Tea Co. Lid [1971] 79 I.T.R 294 Cal.. upon which the assessee relies, is also of no assistance to the assessee. The interest claimed in that case was paid on borrowed capital from which money was withdrawn for remittance to the United Kingdom for the purpose of paying dividend to the shareholders. The court proceeded on the view that the payment of dividend fell within the meaning of the expression “purpose of the business”.

12. Finally, our attention has been drawn by the assessee to the dictum in Eastern Investments Ltd v. Commissioner Of Income Tax, West Bengal [1951] 20 I.T.R 1 that even if money is expended voluntarily, and not of necessity with a view to an immediate benefit to the trade, it is an allowable expenditure if it is expended on the ground of commercial expediency and in order to facilitate the carrying on of the business. We are not satisfied that the payment of Rs. 5,50,000 was made on the ground of commercial expediency. No commercial expediency was involved in making payment to the engineering college. The borrowing was not made for the purpose of the business, either directly or indirectly. The mere possibility that if the borrowing had not been made the assessee would have had to resort to its income-yielding assets does not improve the assessee's case. The borrowing still remained unrelated to the business of the assessee. The interest is not allowable as a deduction either under section 10(2)(iii) or under section 10(2)(xv) of the Act. Therefore, the questions referred in Income-tax Reference No. 775 of 1970 must be answered in the negative. As regards the question referred in Income-tax Reference No. 342 of 1964, there is nothing on the record before us to establish that Smt. Indermani Jatia had actually donated Rs. 10 lakhs to the engineering college. We have before us a certificate, dated October 17, 1958, of the District Magistrate, Bulandshahr, and all that it says is that Smt. Indermani Jatia had promised a donation of Rs. 10 lakhs on October 21, 1955, out of which a sum of Rs. 5,50,000 was deposited in “a joint account maintained in the name of the District Magistrate, Bulandshahr and Smt. Indermani Jatia in the name of Seth Gangasagar Jatia, Electrical Engineering Institute, Khurja”. The certificate further says that the remaining sum of Rs. 4,50,000 was left as a loan with Smt. Indermani Jatia and that interest accrued on it at the rate of eight annas per cent per month. The Tribunal has not attached any importance to this certificate, and we think rightly so. It is not a document contemporaneous with the transaction alleged. It is a certificate granted three years later and by an officer who has not been shown to have been the District Magistrate when the donation is said to have been made. Except for the certificate, there is no other material. The Tribunal has observed that the assessee had made an entry in her own account books crediting the trust, but the trust had not yet come into existence. The amount credited represented her own funds and lay entirely within her power of disposition. Upon this, it seems to us that the Tribunal is right in holding that the sum of Rs. 4,50,000 had not been donated by the assessee on October 21, 1955, in favour of the engineering college. That being so, the interest credited by the assessee on the sum of Rs. 4,50,000 and the accretion thereto continued to belong to the assessee and she is not entitled to the deduction claimed by her on that account. Accordingly, we answer the question referred in the negative.

13. The Commissioner of Income-tax is entitled to his costs, which we assess at Rs. 200, as one consolidated set of costs in both cases. Counsel's fee is assessed in the same figure.