Suhas Chandra Sen, J. - (1.) The Tribunal has referred the following questions of law to this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in presuming that payments of the assessee-company's income-tax liability were made during the previous year out of its overdraft from the Chartered Bank when all the company's sale proceeds and receipts during the year covering its profits far in excess of such tax liability were being deposited in that overdraft account and as such in holding that a proportionate part of the interest on the said overdraft was referable to the tax payments ?" 2.Without prejudice to question No. 1 above, whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 14,917 being the interest purported to be referable to the company's overdrafts from the Chartered Bank to the extent of the payment of its aforesaid income-tax liability did not qualify for allowance under Section 36(1)(iii) of the Income-tax Act, 1961 ?"
(2.) The assessment year is 1973-74 for which the accounting year was the year ending December 31, 1972. A sum of Rs. 14,917 paid by way of interest to a bank was disallowed by the Income-tax Officer on the ground that this interest was really for the purpose of money borrowed for payment of income-tax.
(3.) In the appeal before the Appellate Assistant Commissioner, it was pointed by the assessee that as against payments of Rs. 12,94,485 the net profits of the company were as much as Rs. 18,35,992. The overdraft account with the Chartered Bank was not utilised by the assessee for payment of taxes. The Appellate Assistant Commissioner observed : "The Income-tax Officer had failed to establish that the applicant had actually borrowed moneys from the banks to meet the tax liabilities. In view of the fact that the applicant had adequate profits to meet the entire tax liability for the relevant previous year, the Income-tax Officer's presumption that part of the overdraft could have been utilised for payment of taxes is not warranted if the overall facts and circumstances of the case are taken into account.";