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TMI Blog1981 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1973-74, the ITO disallowed a sum of Rs. 3 lakhs out of claim for deduction of interest of Rs. 3,32,612 by way of overdraft interest on bank loans. For the assessment year 1974-75, the ITO disallowed a sum of Rs. 2,74,215 while in the assessment year 1975-76 he disallowed a sum of Rs. 1,52,543 out of interest paid on bank loans. The ITO found that the assessee had advanced a sum of Rs. 24 lakhs to one Induri Farms Ltd., a subsidiary of the assessee, free of interest. He also found certain advances made to staff members free of interest. We are not concerned with the second advances made by the assessee in the present appeals. The assessee's contention in regard to the loan to Induri Farms Ltd. was that cow's milk and eggs were in short su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Bombay Samachar Ltd. [1969] 74 ITR 723 (Bom.), CIT v. Pudukottai Co. (P.) Ltd. [1972] 84 ITR 788 (Mad.) and CIT v. Carew Co. (P.) Ltd. [1979] 120 ITR 540 (SC). It was also submitted that no specific amounts out of the borrowings made by the assessee were advanced to the said company. Therefore, it could not be said (assuming for the sake of argument, that the loan was not for the purpose of business) that there was diversion of any specific loan borrowed by the assessee for non-business purposes, if any. The learned departmental representative, on the other hand, relying on the orders of the authorities below and in particular the decision in the case of United Breweries, contended that the disallowance was justified. 8. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessee had ample resources at its disposal and need not have borrowed, is not a relevant matter for consideration." 5. In Rohtas Industries, it was held that the advances made by the assessee for the purpose of securing raw material, could be said to be wholly and exclusively for the purpose of the assessee's business. Non-realisation of such advances was allowable as bad debt. 9. In the light of the above judicial pronouncements, the first point which we have to consider is, whether the interest-free advances as made by the assessee could be said to be in course of the assessee's business. The undisputed facts are that the assessee had been procuring substantial portion of its raw materials, namely, milk and eggs, from Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case, the loans were also utilised in course of the assessee's business. In such a case, therefore, the disallowance of a portion of the interest as the lower authorities did, could not be said to be justified in law, or on facts. The disallowance, therefore, stands deleted. 10. [This para is not reproduced here as it involves a minor issue.] 11. The next contention is in regard to claim for treating depreciation as an expenditure for allowance of weighted deduction under section 35C of the Income-tax Act. The controversy relates to the assessment years 1974-75 and 1975-76. While determining the agricultural development allowance as provided for under section 35C, the ITO reduced the total expenditure as claimed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 (SC). In that case, it is observed as follows: " 'Spending' in the sense of 'paying out or away' of money is the primary meaning of 'expenditure'. 'Expenditure' is what is paid out or away and is something which is gone irretrievably. Expenditure, which is deductible for income-tax purposes, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure." The above provisions of section 35C, in our opinion, in the light of the meaning of the expression 'expenditure' postulate a sum which is spent put irretrievably and does not take within its scope allowance like depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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