Law:

Section:

Section 37(1), read with section 256(1), of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee had an overdraft account with a bank which it utilised for payment of advance tax, etc. - Tribunal disallowed the deduction of interest on overdraft to pay taxes as it found that assessee had utilised overdraft for payment of tax - On reference, the assessee contended, inter alia, that deposits in its overdraft account were sufficient to cover the payments of taxes during relevant previous year and, therefore, the presumption was that the taxes had been paid out of such deposits and not out of overdraft - Whether in view of fact that on this aspect there was no finding of Tribunal and no such argument was advanced by assessee before Tribunal, assessee could not be permitted to raise this argument before High Court and, therefore, deduction of interest on overdraft was lightly disallowed - Held, yes Facts In the accounting year, relevant to the assessment year in question, the assessee-company had an overdraft bank account. The assessee had utilised the overdraft for the purpose of payment of advance tax and/or other taxes. Interest attributed to said borrowings on overdraft utilised for the payment of the taxes was disallowed by the ITO. On appeal, the Tribunal found that the assessee had utilised the overdraft for the payment of tax. Accordingly, it upheld the ITO's order. On reference, the assessee submitted that deposits in its overdraft account were sufficient to cover the payments of taxes during relevant previous year and, therefore, the presumption was that the taxes had been paid out of such deposits and not out of overdraft. The assessee, alternatively, argued that the calculation of interest which was disallowed was defective inasmuch as it had been made upon the state of the overdraft amount at the end of each month, whereas it should have been made on the basis of overdraft account from day to day. In any event, the assessee lastly contended that the case should be sent back to the Tribunal for the preparation of a supplementary statement of case. The revenue, on the other hand, pointed out that neither of the aforesaid arguments…

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