TMI Blog2002 (6) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961, from the appellant did not form part of the income-tax and, therefore, was not deductible in computing the chargeable profits under rule 2(i) of the First Schedule of the Companies (Profits) Surtax Act, 1964." 3. Since the other grounds of appeal were not pressed, we are not required to adjudicate the same and they are rejected as not pressed. 4. The AO completed the assessment under section 6 of the Companies (Profits) Surtax Act, 1964, vide his order dated 15-9-1992. The method of computation of chargeable profits was challenged before the CIT(A) by the assessee. In particular, it was submitted that the AO was not justified in not deducting the interest levied on the appellant under sections 215 and 217 of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that from the definition, it is clear that interest chargeable under section 215 cannot be in the nature of tax. He, therefore, rejected the contention of the ld. Counsel by observing that looking to the restrictive scope of deduction/exclusion as contemplated under said rule 2 of the First Schedule of the Companies (Profits) Surtax Act, 1964. 6. The ld. Counsel for the assessee, Shri Prakash Narain, Adv. made a detailed submission before us. According to him, the interest under sections 215 and 217 of the I.T. Act is part of income tax and is another name of Income-tax Act. According to him, the levy of interest, is a part of the process of assessment. In support of this contention, the ld. Counsel placed reliance on the following d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount- (a) the amount of income tax, if any, payable by the company in respect of any income referred to in clause (i) or clause (ii) or clause (iii) or clause (viii) of rule 1 included in the total income; (b) the amount of income-tax, if any, payable by the company under the provisions of the annual Finance Act with reference to the relevant amount of distributions of dividends by it. Explanation: In this sub-clause, the expression "the relevant amount of distributions of dividends" has the meaning assigned to it in the Finance Act of the relevant year; (c) the amount of income-tax, if any, payable by the company under section 104 of the Income-tax Act. Explanation: In relation to the assessment year commencing on the 1st day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction. The Hon'ble Allahabad High Court held that interest payable on arrears of cess or purchase tax was allowable deduction. In this regard, Hon'ble Court made following observations:-- "Precisely the same position prevails in the present case. We are of the opinion that the arrears of cess and purchase tax along with interest thereon are proper deductions to be made in computing the net profits liable to tax under section 28(1) without having recourse to the provisions contained in sections 30 to 43A of the Act. In carrying on a business an assessee may not be able to discharge his financial commitments in time and as a result may become liable to pay damages or interest. Such a situation is a normal incident of business and any los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period a larger sum will become payable as cess. The enlargement of the cess liability is automatic under section 3(3). No specific order is necessary in order that the obligation to pay interest should accrue. The liability to pay interest is as certain as the liability to pay cess. As soon as the prescribed date is crossed without payment of the cess, interest begins to accrue. It is not a penalty, for which provision has been separately made by section 3(5). Nor is it a penalty within the meaning of section 4, which provides for a criminal liability and a criminal prosecution. The penalty payable under section 3(5) lies in the discretion of the collecting officer or authority. In the case of the penalty under section 4, no prosecution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Co., it held that correct law was laid down in the case of Kamlapat Motilal. 13. In view of the above referred decisions, it is clear that the interest arrears of cess is allowable deduction alongwith the cess or sugar cane tax. This view has been adopted mainly on the ground that interest is not penalty, but is part of the process of assessment of tax and partakes the character of tax. On the similar analogy, it can be said that while allowing deduction on account of income tax for computing chargeable profit under the Companies (Profits) Surtax Act, 1964, the interest on such income tax levied or leviable under sections 215 and 217 of Income-tax Act, 1961, which forms part of the process of assessment of tax should also be allowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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