TMI Blog1976 (11) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... of business and accordingly allowable as deduction ? " The assessee, a registered firm, comprising of three partners carried on business in different commodities from Bombay " Pedhi " and from various branches in India and the question relates to the disallowance of a part of interest on borrowed monies in the relevant assessment years 1958-59 to 1965-66. The Income-tax Officer disallowed Rs. 64,075, Rs. 88,469, Rs. 55,199, Rs. 48,705, Rs. 63,717, Rs. 1,23,085, Rs. 1,21,988 and Rs. 1,05,984, out of the interest amount on the ground that the borrowings of the firm to the extent were not for the business purposes but were partly for meeting certain income-tax liabilities of the firm and the partners during the aforesaid assessment years, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the interest, first, that there were no fresh borrowals during the years under reference for paying any taxes and the profits of the relevant years more than covered the additional taxes; secondly, that the business being that of banking, there were no borrowals as such but only deposits were made by the clients ; and, thirdly, that had it not been for the unreasonable delay in recovering the taxes wrongly, the assessee would not have been required to pay huge interest. It was pointed out that during the years 1946-47 to 1951-52, the assessee-firm was required by the income-tax authority to pay large sums by way of income-tax and excess profits tax not against specific demands but on lump sum basis as a sort of co-operation to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been able to reduce part of the interest on its own dealings was not correct. The Tribunal ultimately decided the point in favour of the assessee by allowing the deductions claimed principally on two grounds. In the first place, having regard to the ratio of this court's decision in Commissioner of Income-tax v. Bombay Samachar P. Ltd. [1969] 74 ITR 723 (Bom) and having regard to the fact that the business of the assessee was that of banking and there were no borrowals as such but only acceptance of deposits by the assessee from their clients. All the three conditions mentioned by this court under the aforesaid decision as per the provisions of section 10(2)(iii) were completely satisfied and that the borrowings or acceptance of the depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted position that the assessee-firm does business not only in textiles but also in banking. In banking business it is, therefore, bound to accept deposits from depositors in the course of banking business. As to how to utilise these deposits profitably is a subsequent issue. The deposits were, therefore, received in the course of its business. It is now well settled law that once the borrowings were made in the course of business, interest has to be allowed on such borrowings till they are repaid. " The Tribunal has then proceeded to observe that the ratio of this court's decision in Commissioner of Income-tax v. Bombay Samachar P. Ltd. [1969] 74 ITR 723 (Bom) was clearly applicable to this case, inasmuch as all the three condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct as indicated above. Secondly, Mr. Joshi urged that the Tribunal could be said to have indulged in some sort of conjecture when it stated that the assessee was forced to accept the deposits from its clients. But it must be pointed out that if the department or the revenue wanted to challenge the finding of fact recorded by the Tribunal in this behalf, a proper question in that behalf would have been raised by that department. But no such question challenging the finding of fact as being based on no evidence at all on the record has anywhere been indicated even in the petition filed for obtaining rule. In fact, the question as framed in respect of which the rule has been obtained lays considerable emphasis only on the aspect of the user of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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