Om Prakash, J. - (1.) At the instance of the Revenue, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following three questions relating to the assessment year 1972-73 under Section 256(2) of the Income-tax Act, 1961, for the opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal, was legally correct in allowing the assessee's claim of interest of Rs. 1,90,435 paid on account of late payment of cane purchase tax?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in reducing the disallowance of interest made by the Income-tax Officer on the ground that part of the bank overdraft for which such interest was paid was utilised by the persons substantially interested in the affairs of the company and by the concerns closely connected with them?
(3.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in basing its findings on the proposition that in a case like that mentioned in question No. 2 only the overall position should be considered and not the individual account of the person utilising the fund of the company?" 2. Question No. 1. -- The assessee engaged in the business of manufacture and sale of sugar had paid interest to the tune of Rs. 1,90,435 on account of late payment of cane purchase tax which was disallowed and then the question arose whether interest paid by the assessee was deductible. Similar question came up for consideration before this court in Dhampur Sugar Mills Ltd. v. CIT [1991] 188 ITR 787 and then this court answered the question in favour of the assessee and against the Revenue. Following the said decision, we answer question No. 1 in favour of the assessee and against the Revenue. 3. Question No. 2.-- The assessee-company took an overdraft from the bank part of which amount was diverted to the directors and other firms in which the directors of the company were substantially interested. On such advances, no interest was charged from the directors. The assessing authority held that the amount was advanced to the directors and the firms by the assessee-company from the overdraft for non-business purposes and, therefore, the interest paid by the assessee-company to the bank was disallowed to that extent. This question also came up for decision before this court in the case of the assessee itself in the immediately suceeding assessment year and then this court decided such question in favour of the Revenue and against the asscssce. (See CIT v. Saraya Sugar Mills (P) Ltd, [1992] 193 ITR 575 ). Following the said decision, we answer question No. 2 in favour of the Revenue and against the assessee.;