TMI Blog1981 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... uch tax deducted, to the credit of the Central Government within the prescribed time. The assessee did deduct tax as required under section 192 but failed to pay the amount to the credit of the Government within the prescribed time. Consequently, it was required to pay interest under section 201(1A) of the Act, in the sum of Rs. 22,253. It is this interest which has been claimed by the assessee as a business expenditure. 3. It was the contention of the assessee that the amount of tax deducted at source was utilised by it for carrying on its business and, consequently, the interest payment under section 201(1A) should be regarded as interest paid on borrowed funds utilised for the purpose of the business. The ITO was of the view that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its business and even if there may be an element of illegality in withholding the payment of such tax to the Government, the interest referable to such delay would be admissible as a revenue deduction. In this connection, he referred to the decision of the Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40. He also referred to the decision of the Gujarat High Court in CIT v. Tarun Commercial Mills Co. Ltd. [1977] 107 ITR 172, pointing out the distinction between an expenditure incurred for the purpose of a business and payments in the nature of penalties. Reliance was also placed on the decision of the Allahabad High Court in CIT v. J.K. Cotton Spg. Wvg. Mills Co. [1980] 123 ITR 911. 6. On behalf of the revenue, it was argued tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness for purposes of charging of income-tax. In the present case, it is not the stand of the assessee that the business carried on by it is an illegal business. It is a perfectly legitimate business of travel agents. The interest has been charged under section 201(1A) for a statutory default committed by the assessee. There is no nexus between the commission of such default and the carrying on of the business. In other words, it is not incidental to the carrying on of the legitimate business that the assessee should commit such a default incurring the payment of such interest. Thus, as the payment of the interest under section 201(1A) could not be said to be incidental to the carrying on of the business by the assessee, the authorities belo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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