M/S. EAST INDIA PHARMACEUTICAL WORKS LTD. vs COMMISSIONER OF INCOME TAX. WEST BENGAL

The Supreme Court addressed the issue of whether interest paid on borrowed funds for the purpose of paying income tax can be considered an allowable business expense under Section 37(1) of the Income Tax Act, 1961. The Court upheld the decisions of the lower authorities, concluding that such interest does not qualify as an expenditure laid out wholly and exclusively for business purposes. Consequently, the appeal was dismissed, affirming the High Court's ruling that the payment of income tax cannot be deemed a business expense.