S.C.Sen, J. - (1.) The Tribunal has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 ("the Act") : " Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the interest paid by the assessee-company was in respect of deposits received by it and, as such, 15 per cent. thereof was not allowed as deduction under Section 40A(8) of the Income-tax Act, 1961 ?"
(2.) The relevant assessment year is 1982-83, for which the year of accounting was 1981-82.
(3.) The Tribunal has stated the following facts set out in the statement of the case : "The assessee-company is admittedly neither a banking company nor a financial company. It claimed to have had incurred an expenditure of Rs. 99,320 by way of interest in respect of moneys received by it. The Income-tax Officer disallowed Rs. 14,989 under Section 40A(8) of the Act being 15 per cent. of Rs. 99,320, The assessee took up the matter in appeal before the Commissioner (Appeals). Its contention before the Commissioner (Appeals) was that out of Rs. 99,320, Rs. 93,247 was paid as interest to Amit Kumar Daga, Godavari Devi Daga, Lila Bhoopal, Sunil Kumar Daga and others, Bhagwan-das Daga and others, Bhawandas Daga and Bansidhar Sitaram and Co., who were directors, their relatives and firms in which they were inter-ested. The credits in their accounts, the assessee-company took a stand, could not be considered to be "deposits" within the meaning of Section 40A(8) of the Act. The plea of the assessee found favour with the Commissioner (Appeals). He accordingly deleted the disallowance of interest paid to these persons. The Department came up in appeal before the Tribunal. The Tribunal, following its earlier order dated July 27, 1984, in the cross-objection Nos. 148 to 150 (Cal) of 1982 in I.T.A. Nos. 2124 to 2126 (Cal) of 1982 relating to the assessment years 1979-80 to 1981-82 filed by the assessee allowed the Department appeal by the order under reference.";