TMI Blog2009 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant. Mr. J.D. Mistry with Mr. Raj Darak Mr. P.C. Tripathi, for the Respondent. JUDGMENT The judgment of the court was delivered by F.I. REBELLO, J. - Admit on the following question:- (A) Whether on the facts and in the circumstance of the case and in law the Hon'ble Tribunal was justified in holding that the Assessee Company had sufficient funds of its own for making the investments without using the interest bearing funds even though the Balance Sheet of the Assessee Company as at 31.03.1999 shows that the Assessee Company has no reserve or own funds for making the investments in the sister concern and therefore, borrowed funds have been utilized and interest on these borrowed funds are rightly disallowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of generation of power. The Companies in which the investments were made, were in the energy sector. Investments were made mainly during January, 2000 to March, 2000. It was the submission of the Assessee that they had earned regular business income from distribution of power and investments made were in the companies in energy sector and were with a view to build long term business prospects. Investments were in the regular course of business and accordingly no part of interest can be disallowed when the fund is utilized for the purpose of business. It was also pointed out that respondent had borrowed Rs.43.62 crores by way of issue of Debentures and the said amount was utilised as capital expenditure and inter corporate deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be contended that the shareholders funds of Rs.172,10,88,000/- were utilised for the purchase of fixed assets shown in Schedule D in terms of the balance sheet as on 31 st March, 1999. It was submitted that the assessee had no reserve or own funds for making the investments in the sister concern and, therefore, borrowed funds had been utilised and interest on these investments are for non-business purposes and hence rightly disallowed by the Assessing Officer. 9. On the other hand on behalf of the Assessee the learned Counsel relied on the order of C.I.T. (Appeal) and submitted that the assessee had total interest free fund of Rs.398 crores. 10. From the facts on record the learned Tribunal was pleased to record a finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutta, 134 ITR 219. It was further submitted that the view taken by the Calcutta High Court had found approval by the Supreme Court in East India Pharmaceutical Works Ltd. vs. Commissioner of Income-Tax 224 ITR 627 (S.C.). 13. We have heard learned Counsel for both the parties. In our opinion the very basis on which the Revenue had sought to contend or argue their case that the shareholders funds to the tune of over Rs.172 crores was utilised for the purpose of fixed assets in terms of the balance sheet as on 31 st March, 1999, is fallacious. Firstly, we are not concerned with the balance sheet as of 31 st March, 1999. What would be relevant would be balance sheet as on 31 st March, 2000. Apart from that, the learned Counsel h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcomber's case (Supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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