A.R.DAVE,J. - (1.) AT the instance of the applicant-assessee the following question has been referred to this Court for its opinion under the provisions of S. 256(1) of the IT Act by the Tribunal, Ahmedabad Bench-B : "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the disallowance of interest amounting to Rs. 40,352 claimed under ss. 28, 36(1)(iii) or S. 37 of the IT Act, 1961?"
(2.) LEARNED advocate Shri B.D. Karia has appeared for the applicant-assessee whereas learned senior Central Government standing counsel Shri B.B. Naik has appeared for the Revenue. The assessee is a limited company which had paid interest on the amount which was borrowed for the purpose of payment of income-tax. The amount of interest paid by the assessee was disallowed by the AO. Being aggrieved by the disallowance the assessee filed an appeal before the CIT(A) but the appeal had been dismissed. The appeal filed before the Tribunal had also been dismissed. In the circumstances, the question referred to hereinabove is to be decided by this Court.
(3.) THE learned advocates have fairly submitted that the question which has been referred to this Court has been answered by this Court in the judgment delivered in the case of Saras Pur Mills Ltd. vs. CIT (1997) 137 CTR (Guj) 591: (1997) 226 ITR 533. Moreover, it has been submitted that in principle, the Supreme Court has also decided in the case of East India Pharmaceutical Works Ltd. vs. CIT (1997) 139 CTR (SC) 372: (1997) 224 ITR 627 (SC) that such interest paid by the assessee would not amount to business expenditure and, therefore, such an expenditure cannot be allowed.;