- (1.) This is a Reference under section 256(1) of the Income Tax Act, 1961. The assessment year is 1872-73. The previous year ends on December 31, 1971. The question before us runs thus: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of interest of Rs.28,488/- on money borrowed for payment of income-tax was not an expenditure laid out wholly and exclusively for the purpose of business as contemplated by sub-section (1) of section 37 of the Income-tax Act, 1961 ?" The assessee is a company. The company had an overdraft account with a bank and utilized this account for payment of income-tax and claimed the proportionate interest paid on the said amount as an allowable expenditure under section 37(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act).
(2.) The Income-tax Officer disallowed the claim. The appeals filed by the assessee were dismissed by both the Appellate Authorities by following the case of (1) Mannalal Ratanlal v. Commissioner of Income-tax, 58 ITR 182.
(3.) S. P. Mitra, J., (as he then was) speaking for this Court in the aforesaid case, held that the interest paid on a borrowed amount for payment of income-tax is not a deductible expenditure under Section 10(2) (xv) of the Indian Income-tax Act, 1922.;