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TMI Blog1984 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... llowances made by the ITO. 2. The assessee is a company. Under section 58A of the Companies Act, 1956, no company shall invite or accept a deposit from the public or its members in excess of the limits prescribed by the Central Government in consultation with the RBI. In the present case, it is an admitted fact that in terms of those conditions prescribed by the Central Government the company co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a business expenditure in the preceding assessment year on the same facts. He, accordingly, directed the allowance of this deduction for this assessment year also. 3. In this appeal, the contention of the revenue was that since the borrowal itself was in contravention of the provisions of the Companies Act, the liability to pay interest could not be allowed as a proper deduction under the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the revenue that even this provision says nothing about the interest payable on the deposit and, therefore, there can be no liability to pay the interest. This argument also ignores the fundamental principles of law relating to contracts which may be void. Even assuming that a borrowal made in contravention of section 58A is either illegal as being forbidden by law or opposed to public poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of business. It follows that the condition prescribed under section 37 of the Act is clearly satisfied and the Commissioner was right in allowing the deduction of this amount. The revenue harps upon the fact that there was a contravention of the provisions of the Companies Act but it has to be remembered that the payment of the interest was not the consequence of that contravention. If at al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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