East India Pharmaceutical Works Ltd. v. CIT

224 ITR 627Supreme Court of India1997#694 most cited

What is East India Pharmaceutical Works Ltd. v. CIT authority for?

Where an assessee has mixed funds (both interest-bearing and interest-free funds) and makes an interest-free advance or investment, it is presumed that the interest-free funds were utilized first if they are sufficient to cover such advances or investments. This prevents disallowance of interest on borrowed funds under Section 36(1)(iii).

146

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 2015 to 2026.

Also referred to as

East India Pharmaceutical Works Ltd v CIT · 224 ITR 627 · Section 36(1)(iii) · interest disallowance · mixed fund theory · interest free advances · borrowed funds · commercial expediency · presumption of utilization · interest on borrowed capital

Also reported as

91 Taxmann 185

Sections most often in play

Section 143(1)Section 143(3)Section 1961Section 36(1)(iii)Section 144C(1)Section 144C(5)Section 194JSection 195
Read the full judgment

Issues it is cited on

interest free advancessection 36(1)(iii)advance taxcommercial expediencysection 32section 36(1)section 36section 40(a)capital expendituresection 37(1)section 40section 37

Judgments citing East India Pharmaceutical Works Ltd. v. CIT

DCIT, New Delhi vs. M/S. Sindhu Realtors Pvt. Ltd., New Delhi

In the result, the appeal of the assessee is allowed

ITA 2768/DEL/2012[2008-09]Status: DisposedITAT Delhi11 Dec 2015AY 2008-09

Bench: Shri G.D. Agrawal & Shri A.T. Varkey

For Appellant: S/Shri Salil Kapoor & Sanat Kapoor, AdvocatesFor Respondent: Shri B.R.R. Kumar, Senior DR
Section 142(1)Section 143Section 2(22)Section 2(22)(e)

…t to the judgment of Hon’ble Bombay High Court in the case of CIT 24 ITA No.2706 & 2768/Del./2012 vs. Reliance Utilities & Power Ltd. – 313 ITR 340, wherein the judgment of Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. vs. CIT – 224 ITR 627 and Hon’ble Calcutta High Court in Woolcombers of India Ltd. vs. CIT – 134 ITR 219 (Cal.) relied on, held as under :- “10. If there be interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest free funds availa…

M/S. Sindhu Realtors Pvt. Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee is allowed

ITA 2706/DEL/2012[2008-09]Status: DisposedITAT Delhi11 Dec 2015AY 2008-09

Bench: Shri G.D. Agrawal & Shri A.T. Varkey

For Appellant: S/Shri Salil Kapoor & Sanat Kapoor, AdvocatesFor Respondent: Shri B.R.R. Kumar, Senior DR
Section 142(1)Section 143Section 2(22)Section 2(22)(e)

…t to the judgment of Hon’ble Bombay High Court in the case of CIT 24 ITA No.2706 & 2768/Del./2012 vs. Reliance Utilities & Power Ltd. – 313 ITR 340, wherein the judgment of Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. vs. CIT – 224 ITR 627 and Hon’ble Calcutta High Court in Woolcombers of India Ltd. vs. CIT – 134 ITR 219 (Cal.) relied on, held as under :- “10. If there be interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest free funds availa…

DCIT, Bangalore vs. M/S Grameen Financial Services Pvt. Ltd., Bangalore

In the result, the appeal by the Revenue is dismissed

ITA 949/BANG/2015[2011-12]Status: DisposedITAT Bangalore06 Nov 2015AY 2011-12

Bench: Smt. Asha Vijayaraghavan & Shri Jason P. Boazassessment Year : 2011-12

For Appellant: Ms. Neera Malhotra, CIT(DR)For Respondent: Shri Shesadri, CA
Section 143(3)Section 14A

…sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT [1997] 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. [1982] 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft…

ACIT, New Delhi vs. Oriental Bank of Commerce, New Delhi

In the result, appeal of the assessee and revenue is partly allowed

ITA 1961/DEL/2011[2007-08]Status: DisposedITAT Delhi04 Nov 2015AY 2007-08

Bench: Sh. I.C.Sudhir, Jm & Sh. Prashant Maharishi, Am Asstt. Year: 2007-08

For Appellant: Sh. K.V.S.R.Krishna, CAFor Respondent: Sh. R.R.Singh, CIT., DR
Section 14ASection 36(1)(vii)Section 36(1)(viia)

…sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. (1982) 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft…

Oriental Bank of Commerce, New Delhi vs. Addl. CIT, New Delhi

In the result, appeal of the assessee and revenue is partly allowed

ITA 1937/DEL/2011[2007-08]Status: DisposedITAT Delhi04 Nov 2015AY 2007-08

Bench: Sh. I.C.Sudhir, Jm & Sh. Prashant Maharishi, Am Asstt. Year: 2007-08

For Appellant: Sh. K.V.S.R.Krishna, CAFor Respondent: Sh. R.R.Singh, CIT., DR
Section 14ASection 36(1)(vii)Section 36(1)(viia)

…sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. (1982) 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft…

M/S Stanley Lifestyle Pvt. Ltd., Bangalore vs. Pr.CIT, Bangalore

In the result, appeal of the assessee is partly allowed

ITA 608/BANG/2015[2010-11]Status: DisposedITAT Bangalore14 Aug 2015AY 2010-11

Bench: Shri. N. V. Vasudevan & Shri. Abraham P. George

For Appellant: Shri. V. Srinivasan, CAFor Respondent: Shri. Sunil Kumar Agarwala, JCIT
Section 143(3)Section 263

…sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT [1997] 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. [1982] 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft…