COMMISSIONER OF INCOME TAX1 Vs. BAKELITE HYLAM LIMITED

JUDGEMENT

(1.) This reference relates to the income-tax assessment year 1977-78. It is made at the instance of the Commissioner of Income-tax under section 256(1) of the Income-tax Act, 1961 ("the Act", for short).

(2.) The assessee is a company incorporated under the Companies Act. Its bank account, we are told, is continually an overdraft account. Substantial interest was paid to the bank on the amounts of overdraft ascertained at periodical intervals. It is common ground that all this interest was allowed as deduction in computing of the assessee under section 36 of the Act.

(3.) It transpired that the assessee-company invited the public to make deposits with it. Pursuant to such invitation, deposits aggregating to deposits with it. Pursuant to such invitation, deposits aggregating to Rs. 65,76,000 were made by the public. These monies, we understand, are deposits in the overdraft bank account with the result that the overdraft balance was considerably reduced and so also the interest thereon.