Parikh Enterprises (P) Ltd. vs Commissioner of Income Tax

K.A. Puj, J.

At the instance of the assessee, the following question of law is referred for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the disallowance of interest of Rs. 20,838 in respect of unit No. I u/s 40A(8) of the Income Tax Act, 1961 ?"

The assessment year involved is 1982-83. The Income Tax Officer has disallowed the interest u/s 40A(8) of the Income Tax Act, 1961. Being aggrieved by the said decision, the assessee has preferred an appeal before the Commissioner (Appeals) who has confirmed the said disallowance and the assessee has preferred the second appeal against the order of the Commissioner (Appeals) confirming the disallowance of interest made by the Income Tax Officer.

Heard Mr. S.N. Divetia, the learned advocate appearing for the assessee and Mr. B.B. Naik, the learned standing counsel appearing for the respondent.

At the time of hearing of this reference, our attention is drawn to the decision of this court in the case of Commissioner of Income Tax Vs. Navjivan Roller and Pules Mills, wherein this court has discussed in detail the provisions contained in section 40A(8) and has also considered the decisions of the Bombay, Madras and Madhya Pradesh High Courts.

While agreeing with the view of the Bombay and Madras High Courts and dissenting from the view taken by the Madhya Pradesh High Court, this court has held that any interest paid on any money received by the company other than a banking company or a financial company which does not fall in any of the exceptions contained in clauses (i) to (viii) of Explanation (b) to section 40A(8) and its deduction, which is an allowable expenditure, is governed by section 40A(8) during its operation.

Since the issue raised in the present reference is squarely covered by the decision of this court in the above case, we are of the view that the Tribunal was justified in confirming the disallowance of interest of Rs. 20,838 u/s 40A(8) in respect of unit No. 1.

We, therefore, answer this question in the affirmative, i.e., in favour of the revenue and against the assessee.

The reference is, accordingly, disposed of with no order as to costs.