Court rules in favor of assessee on cane purchase tax interest, but Revenue wins on bank overdraft diversion.

The court ruled in favor of the assessee on Question No. 1 regarding the disallowed interest on late payment of cane purchase tax. However, on Question No. 2 involving the diversion of bank overdraft to directors without charging interest, the court decided in favor of the Revenue based on a previous ruling against the assessee in a similar case. As Question No. 3 was interconnected with Question No. 2, no separate answer was provided. The reference was answered without any order as to costs.

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Issues involved: The judgment involves three questions referred by the Income-tax Appellate Tribunal, Allahabad Bench, for the assessment year 1972-73 under section 256(2) of the Income-tax Act, 1961.

Question No. 1: The assessee paid interest on late payment of cane purchase tax, which was disallowed. The court considered a similar case in a previous judgment and ruled in favor of the assessee. Therefore, the court answered question No. 1 in favor of the assessee and against the Revenue.

Question No. 2: The assessee-company diverted part of the bank overdraft to directors and firms in which the directors had substantial interest, without charging interest. The assessing authority disallowed the interest paid by the company to the bank for non-business purposes. A similar case was decided against the assessee in a previous assessment year. Following that decision, the court answered question No. 2 in favor of the Revenue and against the assessee.

Question No. 3: Since question No. 3 is interconnected with question No. 2, which was decided in favor of the Revenue, no separate answer was provided for question No. 3.

The reference was answered accordingly with no order as to costs.

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