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1981 Supreme(Cal) 269
High Court Of Calcutta
SABYASACHI MUKHERJI, SUDHINDRA MOHAN GUHA
RECKITT AND COLMAN OF INDIA LTD. - Appellant
Versus
COMMISSIONER OF INCOME-TAX - Respondent
Income-Tax Reference 257 Of 1976
Decided On : 07/22/1981
B.K.NAHA, MANISHA SEAL
Proportionate interest paid on the amount utilized for tax payment from the overdraft account is not an allowable deduction.
Headnote:
Interest Deduction - Tax Payment - The court held that the proportionate interest paid by the applicant on the amount utilized for payment of taxes out of the overdraft account is not an allowable deduction.
Fact of the Case:
The profits of the company before payment of taxes as per the profit and loss account was Rs. 1,06,62,415.00. The income returned by the assessee was Rs. 1,06,80,025.00. The income assessed by the ITO was Rs. 1,08,05,310.00. The taxes paid by the assessee for the year were Rs. 73,32,054.00.
Finding of the Court:
In view of the principles enunciated in a previous judgment, the court held that the proportionate interest paid by the applicant on the amount utilized for payment of taxes out of the overdraft account is not an allowable deduction.
Issues: The question referred to the court was whether the Tribunal was justified in holding that the proportionate interest paid by the applicant on the amount utilized for payment of taxes out of the overdraft account is not an allowable deduction.
Ratio Decidendi: The court applied the principles enunciated in a previous judgment to decide that the proportionate interest paid on the amount utilized for tax payment from the overdraft account is not an allowable deduction.
Final Decision: The court answered the question in the negative and in favor of the assessee, and the parties were ordered to pay and bear their own costs.
( 1 ) IT appears that in this reference in respect of the relevant year the profits of the company before payment of taxes as per the profit and loss account was Rs. 1,06,62,415. 00. The income returned by the assessee was Rs. 1,06,80,025. 00. The income assessed by the ITO as per the assessment order appearing in the paper book was Rs. 1,08,05,310. 00. The taxes that were paid by the assessee for the year were Rs. 73,32,054. 00. The month-wise break-up appears to be as follows :
Month Trading receipts deposited in the bank overdraft account as per assessment order
Taxes paid from the bank over draft account as per assessment order
(1) (2) (3) Rs. November 1969 39,18,588 8,42,865
December 1969 29,56,976 14,52,504
January 1970 46,70,075 40,931
February 1970 67,68,610 6,991 1,49,282 3,62,506
June 1970 57,57,362 10,50,210 Rs. 3,92,185
September 1970 41,04,825 19,49,895 10,75,662
October 1970 59,62,251 9,023 3,41,38,681 73,32,054
( 2 ) IN the background of these facts which will appear from the order of the ITO in the instant reference for the assessment year 1971-72, it appears to us that, in view of the principles enunciated by us in I. T. Ref. No. 438 of 1975 (Woolcombers India Ltd. v. CIT), judgment delivered on 12th February, 1981, the question referred to this court, which is as follows : -"whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the proportionate interest paid by the applicant on the amount utilised for payment of taxes out of the overdraft account is not an allowable deduction ?"must be answered in the negative and in favour of the assessee.
( 3 ) IN the facts and circumstances of the case, the parties will pay and bear their own costs.
