H. H. MAHARAJA MARTAND SINGH JUDEO VS COMMISSIONER OF INCOME-TAX
2001 P T D 749
[239 I T R 404]
[Madhya Pradesh High Court (India)]
Before A. K. Mathur, C.J. and S. K. Kulshrestha, JJ
H. H. MAHARAJA MARTAND SINGH JUDEO
versus
COMMISSIONER OF INCOME‑TAX
M. C. C. No.428 of 1987, decided on 24/07/1998.
Income‑tax‑‑‑
‑‑‑‑Business expenditure‑‑‑Interest‑‑‑Money borrowed for paying income tax‑‑‑Interest on money borrowed is not deductible‑‑‑Indian Income Tax Act, 1961, S.37.
Interest on money borrowed for payment of income‑tax is not an expenditure laid out wholly and exclusively for the purpose of business as contemplated by subsection (1) of section 37 of the Income Tax Act, 1961.
East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627 (SC) fol.
H. S. Shrivastava for the Assessee.
Abhay Sapre for the Commissioner.
JUDGMENT
A. K. MATHUR, C.J.‑‑‑This is a reference under section 256(1) of the Income Tax Act, 1961, at tile instance of the assessee and the following question of law has been referred by the Tribunal for answer of this Court:
"Whether, on the facts and in the circumstances of the case, the interest payment of Rs.3,18,203 on bank overdrafts was an allowable deduction in computing the income of the assessee?"
The brief facts which are necessary for disposal of this reference, are that the assessee during .the financial year April 1, 1979, to March 31, 1980, relevant to the assessment year 1980‑81, derived income from interest from banks and private parties at Rs.1,67,338 and dividend income from Indian as well as foreign companies amounting to Rs.5,27,146. The assessee paid interest to the banks to the extent of Rs.3,75,203 and claimed deduction of the same in computing the income from interest and dividends. The Income‑tax Officer allowed the deduction for only Rs.57,000 under section 80VV of the Income‑tax Act, relatable to interest on amounts withdrawn for payment of income‑tax and disallowed the balance of the claim. Thereafter, the matter was taken up in appeal and the appellate authority confirmed the order and ultimately the matter reached the Tribunal and the Tribunal also confirmed the order of the Income‑tax Officer on this issue. Hence, the assessee approached the Tribunal under section 256(1) of the Income‑tax Act for making the reference before this Court and accordingly, the Tribunal has referred the aforesaid question of law. This question has now been answered by their Lordships of the Supreme Court in the case of East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627, and their Lordships of the Supreme Court while dismissing the appeal, held that the High Court was right in holding that the interest of Rs.28,488 on money borrowed for payment of income‑tax was not an expenditure laid out wholly and exclusively for the purpose of business as contemplated by subsection (1) of section 37 of the Income Tax Act, 1961. Hence, in this view of the matter, the view taken by the Tribunal is correct and this reference is accordingly answered in favour of the Revenue and against the assessee.
M.B.A./231/FCReference answered.