1986 (2) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Admissibility of proportionate interest on bank overdraft attributable to investments in the chloramphenicol project.
2. Justification of reopening assessments u/s 147(b) for the assessment years 1966-67 to 1968-69.
3. Admissibility of proportionate interest on bank overdraft attributable to income-tax payments for the assessment years 1966-67 to 1969-70.

Summary:

1. Admissibility of Proportionate Interest on Bank Overdraft Attributable to Investments in the Chloramphenicol Project:
The Tribunal held that the proportionate interest on bank overdraft attributable to the chloramphenicol project was not an admissible deduction. The assessee argued that the project was part of its existing business. However, the Tribunal found that the chloramphenicol project was separate and distinct, set up under a separate industrial licence, and ultimately transferred to another company, Dey-Se-Chem Ltd. The Tribunal's decision was based on the facts presented, and it was concluded that the new project was a separate business.

2. Justification of Reopening Assessments u/s 147(b) for the Assessment Years 1966-67 to 1968-69:
The reopening of assessments was upheld by both the Appellate Assistant Commissioner and the Tribunal. The Tribunal found that the Income-tax Officer came to know about the utilisation of bank overdraft for the chloramphenicol project only during the assessment proceedings for the year 1969-70. This constituted "information" u/s 147(b), justifying the reopening of assessments. The Tribunal's decision was based on the fact that this information was not available during the original assessments.

3. Admissibility of Proportionate Interest on Bank Overdraft Attributable to Income-tax Payments for the Assessment Years 1966-67 to 1969-70:
The Tribunal held that the proportionate interest on bank overdraft attributable to income-tax payments was not an admissible deduction. This decision was supported by the precedent set in the case of Waldies Ltd. v. CIT [1977] 110 ITR 577 (Cal).

Conclusion:
The High Court answered all three questions in the affirmative, in favor of the Revenue, and each party was ordered to bear its own costs.