TaxTMI 
TaxTMI 
1997 (3) TMI 5
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....e-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 conclusion the appellate authority relied upon the decision of the Calcutta High Court in the case of Mannalal Ratanlal v. CIT [1965] 58 ITR 84. The assessee then carried the matter in second appeal before the Tribunal. Before the Tribunal it was contended by the assessee that the tax liability being to the tune of a couple of ....
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....nd 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 should be made applicable and, therefore, it must be held that the High Court committed an error in not accepting the assessee's contention. Learned counsel also placed before us a schedule appended to the assessment order to indicate that the amount of receipts deposited in the overdraft account was much more compared to ....
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.... 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 in Woolcombers' case [1982] 134 ITR 219 came to the conclusion that where profits were sufficient to meet the advance tax liability and profits were deposited into the overdraft account of the assessee, then it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account ....
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....e [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 it must have been borrowed for the purpose of business ; and (3) that the assessee must have paid interest on the said amount and claimed it as a deduction. It was further held that the payment made by the assessee by drawing a cheque on the overdraft account was a borrowing which was made to meet her personal ob....