MISHRI MAL BURAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law :

(2.) THE brief facts of the case are that the interest on the borrowed capital for the previous year prior to the assessment year 1978 79 was disallowed. THE Income-tax Officer was of the view that the debit balance of Rs. 1,38,591 at the beginning of the year for Diwali ending 1977 consisted of withdrawal for two purposes : (i) withdrawal pertaining to the payment of income-tax of Rs. 16,764 + Rs. 129, and (ii) balance for items other than payment of income-tax. THE credit entries were higher by Rs. 14,287 during the year and thus, in the absence of dates in respect of the entries of incomings and outgoings, the estimate of Rs. 5,000 was made, which was considered as the amount for payment of taxes and interest of Rs. 600 thereon was allowed under section 80V. THE Commissioner of Income-tax (Appeals) came to the conclusion that the said figure should be Rs. 14,030 instead of Rs. 5,000 and interest of Rs. 1,680 will be allowable under Section 80V instead of Rs. 600. THE figure of Rs. 14,030 was calculated on the basis that, at the end of accounting year, the figure was Rs. 6,887 and at the beginning of the year, it was Rs. 21,174 and, therefore, the average was taken at Rs. 14,030. THE Income-tax Appellate Tribunal came to the conclusion that the interest on the borrowings made during the accounting period relevant to the assessment year 1978-79 has already been allowed. THE Tribunal was of the view that the interest on borrowed capital for payment of tax during the relevant previous year has to be allowed as deduction while computing the income of the assessee and not for the earlier years.

(3.) ACCORDINGLY, both the references are answered in favour of the assessee and against the Revenue by holding that in respect of the amount outstanding as on the first day of the accounting year of the previous year, which pertains to the payment of taxes, the interest actually paid during the relevant assessment years thereon will be allowable.