TMI Blog1986 (6) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal, for the opinion of this court: " Question No. 1.-Whether, on the facts and in the circumstances of the case and on a proper interpretation of the Income-tax Act, the Tribunal was right in upholding the allowance of interest paid by the assessee to the extent of Rs. 1,63,386 ? Question No 2.-Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the disallowance of the assessee's claim of Rs. 18,653 for depreciation? " On an application of the Revenue also under section 256(1) of the Income-tax Act, 1961, the following questions have been referred, as questions of law arising out of the order of the Tribunal, for the opinion of this court: " Question No. 1.-Whether, on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1986] 158 ITR 58. Following the said decisions, we answer the question in the affirmative and in favour of the assessee. Question No. 2 referred at the instance of the Revenue is also covered by the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. Following the said decision, we answer the question in the negative and in favour of the Revenue. On question No. 1 referred at the instance of the assessee, the facts found or admitted are, inter alia, as follows: The assessee had an overdraft account with the National Grindlays Bank Ltd. in which all receipts were deposited and from which payments on account of taxes and other expenses including capital expenditure, dividends, etc., were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of taxes. At the hearing before us, the learned advocate for the assessee submitted that the controversy raised in the question was covered by several decisions of this court. He cited Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219 (Cal), where it was held that where profits were sufficient to meet the liability to pay advance taxes and that the entire profits had been deposited in the overdraft account of the assessee from which payments were made towards advance taxes, it should be presumed that such taxes were paid out of the profits of the year and not out of the account by way of overdraft, which was held to have been obtained for running the business. It was held that interest paid by the assessee on the overdraft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the assessee apply on all fours to the facts before us. We are not laying down that if money is borrowed either directly or through an overdraft account for payment of income-tax, the interest paid for the same would be a deductible expenditure. All that we are holding is that if money has been deposited by the assessee out of its profits in an overdraft account from which all payments including income-tax are made, the fact that the said overdraft had a continued debit balance would make no difference to the presumption that the income-tax had, in fact, been paid out of the profits and not out of the borrowings. For the reasons as above, we answer question No. 1 returned at the instance of the assessee in the negative and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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