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Ferro Alloys Corporation Ltd. v. Commissioner Of Income-Tax
Factual and Procedural Background
At the instance of the assessee a question of law was referred under section 256(1) of the Income-tax Act, 1961 asking whether the claim for deduction of interest amounts for the assessment year 1976-77 was rightly rejected as not allowable under section 37 of the Income-tax Act. The amounts claimed were Rs. 6,03,168 under section 220(2), Rs. 1,38,506 under section 215, and Rs. 66,590 under section 201(1A). The Income-tax Officer, the Commissioner in first appeal and the Tribunal in second appeal all rejected the claim as not allowable under section 37. The reference was made to this Court for its opinion.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the claim for deduction of interest levied under section 220(2) of Rs. 6,03,168, interest levied under section 215 of Rs. 1,38,506 and interest levied under section 201(1A) of Rs. 66,590 was rightly rejected as not allowable under section 37 of the Income-tax Act, 1961, for the assessment year 1976-77?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Aruna Mills Ltd., Ahmedabad…Applicant; v. Commr. Of Income-Tax, Bombay, [1957] 31 ITR 153 | Consistent view of this Court on disallowance under section 37 | Cited as part of a line of decisions concluding the point against the assessee. |
| CIT v. Ghatkopar Estate and Finance Corporation (P) Ltd., [1989] 177 ITR 222 (Bom) | Consistent view of this Court on disallowance under section 37 | Cited as the later decision in the series supporting the same conclusion. |
| Bharat Commerce Industries Ltd. v. CIT, [1985] 153 ITR 275 | High Court decision adopting the same view (Delhi High Court) | Noted as a decision in other High Courts taking the same view; reference made despite pending SLP against this decision. |
| Federal Bank Ltd. v. CIT, [1989] 180 ITR 37 | High Court decision adopting the same view (Kerala High Court) | Noted as another High Court decision supporting the same position. |
Court's Reasoning and Analysis
The Court observed that the point was concluded against the assessee by a consistent line of this Court's decisions beginning with Aruna Mills Ltd. (1957) and extending to CIT v. Ghatkopar Estate and Finance Corporation (1989). The Court noted that the Delhi High Court (Bharat Commerce Industries Ltd.) and the Kerala High Court (Federal Bank Ltd.) had taken the same view, and that counsel for the assessee expressly stated there was no contrary decision. The Court declined to keep the reference pending merely because a special leave petition against the Delhi High Court decision was pending before the Supreme Court, and therefore proceeded to answer the reference.
Holding and Implications
Answer: In the affirmative.
Holding: The Court answered the referred question in the affirmative, effectively upholding that the claims for deduction of the specified interest amounts were not allowable under section 37 for the assessment year 1976-77. No order as to costs was made.
Implications: The direct effect is that the assessee's claimed deductions for the specified interest amounts remain disallowed. The opinion does not purport to set a new precedent beyond applying the existing consistent line of authorities.
V.A Mohta, J.:— At the instance of the assessee, the following question of law is referred for the opinion of this court under section 256(1) of the Income-tax Act, 1961:
“Whether, on the facts and in the circumstances of the case, the claim for deduction of interest levied under section 220(2) of Rs. 6,03,168, interest levied under section 215 of Rs. 1,38,506 and interest levied under section 201(1A) of Rs. 66,590 was rightly rejected as not allowable under section 37 of the Income-tax Act, 1961, for the assessment year 1976-77?”
2. The assessee was required to pay the following amounts as interest.
Rs. 6,03,168 under section 220(2),
Rs. 1,38,506 under section 215, and
Rs. 66,590 under section 201(1A) of the Income-tax Act. These amounts were claimed as business expenditure under section 37 of the Income-tax Act. The Income-tax Officer, the Commissioner in first appeal and the Tribunal in second appeal, rejected the said claim as not allowable under section 37 and it is against the above basic undisputed background that the question has been referred.
3. The point stands concluded against the assessee by the consistent view of this court right from Aruna Mills Ltd., Ahmedabad…Applicant; v. Commr. Of Income-Tax, Bombay,…., [1957] 31 ITR 153 to CIT v. Ghatkopar Estate and Finance Corporation (P) Ltd., [1989] 177 ITR 222 (Bom).
4. The Delhi High Court in the case of Bharat Commerce Industries Ltd. v. CIT, [1985] 153 ITR 275 and the Kerala High Court in the case of Federal Bank Ltd. v. CIT, [1989] 180 ITR 37, have also taken the same view. Very fairly, Shri Bhide, learned counsel for the assessee, informs us that there is no decision which has taken a contrary view.
5. The reference has been made only because the special leave petition against the Delhi High Court decision in Bharat Commerce Industries Ltd.'s case, [1985] 153 ITR 275 is pending before the Supreme Court. We see no reason for keeping this reference pending indefinitely for that reason.
6. Under the circumstances, we record the answer in the affirmative. No order as to costs.
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