These appeals are directed against disallowance of interest computing income of assessee and denial of interest under s. 214 of IT Act, 1961. assessee is registered firm which had obtained contract for construction of building for MES. assessee framed out contract and income consisted only of commission received from sub-contract. assessee had borrowed funds and advanced it to M/s. Scrap Trading Co., for purpose of purchase of iron and steel for utilisation in building works. claim of assessee to deduct interest paid on borrowed money w s rejected by authorities below on ground that income of assessee was not business income and amount borrowed had not been utilised for purposes of business. assessee has disputed both points by claiming that income even from framing out contract is income from business as held in CIT vs. S.K. Sahana & Sons Ltd. (1976) 102 ITR 437 (Pat) and that amount was actually advanced only for purposes of contract and, therefore, it was for purposes of business. On other hand, it was contended on behalf of Revenue that since agreement of sub- contract did not require assessee to advance any money, interest on borrowed funds should be disallowed as not related to business. But we are of opinion that this issue cannot be decided with reference to obligation but only with reference to actual deployment of funds. It is not in dispute that funds were actually utilised for obtaining iron and steel for contract work and it cannot be denied that borrowed funds were used for purpose of business of assessee. Hence we delete disallowance of interest in both assessment year. assessee claims that interest under s. 214 should be given on tax refunded but this is denied by Revenue on ground that refund arose because of deduction of tax at source which cannot be treated as advance-tax for purpose of s. 214. Reliance was placed by Revenue on decision of Allahabad High Court in case of Addl. CIT vs. Bareilly Corporation Bank Ltd. (1978) 114 ITR 449 (All). On other hand assessee relied on decision of Delhi High Court in case of National Agrl. Co-operative Marketing Federation of India Ltd. vs. Union of India and Ors. (1981) 130 ITR 928 (Del). assessee has also pointed out that advance tax instalment payable is itself calculated under Act only after taking into account tax deducted, at source and, therefore, if refund materialises because of excess payment of tax in whatever form, interest is to be given under s. 214 since Govt, had benefit of amount within accounting year. He also relied upon decisions of Gujarat High Court in Chandrakant Damodardas vs. ITO (1980) 16 CTR (Guj) 1: (1980) 123 ITR 748 (Guj), Anup Engineering Ltd. vs. ITO Ahmedabad (1983) 36 CTR(Guj) 195: (1983) 145 ITR 105 (Guj). On consideration of rival submissions we are of opinion that assessee is entitled to succeed. Even though Allahabad High Court is in favour of assessee, we find all provisions of Act land themselves to different interpretation favouring assessee inasmuch as interest is payable on tax refunded which cannot be identified as either excess of advance tax paid or excess of tax deducted at source. Wherever there is divergence of opinion on construction of Statute, it has been held by Supreme Court in case of CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177: (1973) 88 ITR 192 (SC) that construction favourable to assessee must be adopted. We are therefore, to accept claim of assessee and direct ITO to grant interest under s. 214 in respect of amount of tax refunded to assessee. In result, appeals are allowed. *** HINDUSTAN ENGG., CO. v. INCOME TAX OFFICER