TMI Blog1997 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of 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 sub-section (1) of section 37 of the Income-tax Act, 1961 ?" The assessee is a company having an overdraft account with a bank. During the assessment year 1972-73, the assessee claimed a sum of rupees 28,488 as an allowable expenditure under section 37(1) of the Act, the said amount representing the interest which the assessee had to pay on the overdraft amount, the said overdraft having been made for the payment of income-tax. The Income-tax Officer disallowed the aforesaid deduction claimed by the assessee as he was of the opinion that the payment of income-tax cannot be held to be payment for the purpose of business. Being aggrieved by the said order, the assessee preferred an appeal and the appellate authority agreeing with the Assessing Officer came to hold that the overdraft utilised for payment of tax cannot be said to be for the business purposes of the company. In coming to the aforesaid conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryya, learned counsel appearing for the appellant, argued with vehemence that the assessee having deposited the entire profits in the overdraft account and the amount thus deposited in the overdraft account being much more compared to the income-tax liability and the tax paid, it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business. Consequently, the interest paid by the assessee on the overdraft account relatable to the payment of income-tax should have been allowed as an admissible deduction in the computation of the assessee's business income. In support of this contention, learned counsel appearing for the appellant relied upon the decisions of the Calcutta High Court in Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219, Reckitt and Colman of India Ltd. v. CIT [1982] 135 ITR 698. Indian Explosives Ltd. v. CIT [1984] 147 ITR 392, and Alkali and Chemical Corporation of India Ltd. v. CIT [1986] 161 ITR 820. Learned counsel also urged that these decisions having been allowed to be operative for more than 14 years, the principle of stare decisis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for us to hold that any such contention, as was advanced before this court by the assessee had in fact been advanced either before the Tribunal or before the High Court. The question whether a presumption can be drawn that the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business as was drawn in Woolcombers's case [1982] 134 ITR 219 by the Calcutta High Court and was followed in three other cases of the same High Court, would essentially depend upon the fact as to whether the entire profits had been pumped into the overdraft account, whether such profits were more than the tax amount paid for the relevant year and all other germane factors. But when the assessee never advanced the contention either before the Tribunal or before the High Court and the amplitude of the question posed before the High Court does not bring within its sweep the contention as is advanced by Mr. Bhattacharyya, learned counsel in this court, it would not be appropriate for this court to look into the additional papers produced by the assessee for entertaining the contention and answering the same. It is true that the Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatened and, therefore, the expenditure thus incurred should have been held to be an expenditure for carrying on the business and thus allowable under section 37(1) of the Act which contention, however, was rejected by the Tribunal relying upon the decision of this court in Padmavati [1987] 166 ITR 176. In Padmavati's case [1987] 166 ITR 176, this court held that meeting the liability of income-tax was a personal one and the dominant purpose for paying annuity deposit was not to earn income but to meet the statutory liability of making the deposit. It was further held that the expenditure thus made was not wholly and exclusively for the purpose of earning income and, consequently, the interest, which was paid to discharge the aforesaid tax liability was not allowable under section 57(iii) of the Income-tax Act, 1961. In Madhav Prasad's case [1979] 118 ITR 200, this court also came to the conclusion that in order to enable an assessee to claim deduction in respect of the interest on borrowed capital under section 10(2)(iii) of the Indian Income-tax Act, 1922, three conditions are required to be satisfied ; namely, (1) that money must have been borrowed by the assessee ; (2) that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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