9911796707
TMI Blog1980 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of the manufacture and sale of sugar. In its income-tax return for the assessment year 1959-60 (the previous year being the period ending 30th June, 1958) the assessee claimed a deduction of Rs. 1,20,859 paid as interest on arrears of cess due under the U.P. Sugarcane Cess Act, 1956. The ITO disallowed the claim, but the AAC held that the payment of interest constituted a permissible deduction and this view was affirmed by the Income-tax Appellate Tribunal. For the next assessment year 1960-61 (the previous year ending 30th June, 1959), the assessee claimed a sum of Rs. 1,83,731 paid by way of interest on the arrears of cess. The claim met with the same fortune, disallowed by the ITO but upheld by the AAC and the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certified under s. 66A(2) of the Act that the cases were fit for appeal to this court. The learned counsel for the assessee has made no attempt to justify the claim under s. 10(2)(iii) and we are, therefore, relieved of the necessity of examining the validity of the claim by reference to that provision. The case has been argued before us on the basis that it falls under s. 10(2)(xv). The validity of the U.P. Sugarcane Cess Act, 1956 (the " Cess Act ") was challenged by the assessee and several other sugar manufacturing companies by petitions under art. 226 of the Constitution in the Allahabad High Court. The High Court admitted the writ petitions and granted an order suspending the operation of the Act. The High Court, on final hearing, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed under sub-section (2) shall carry interest at 6 per cent. per annum from such date to date of payment. (4) The State Government may for the purpose of assessment and collection of the cess, appoint officers and authorities and may also prescribe the manner in which the cess shall be assessed and collected. (5) Where any person is in default in making the payment of the cess, the officer or authority empowered to collect the cess may direct that in addition to the amount of the arrears and interest a sum not exceeding 10 per cent. thereof shall by way of penalty be recovered from the person liable to pay the cess. (6) The officer or authority empowered to collect the cess may forward to the Collector a certificate under his signatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess will carry interest at the rate of six per cent. per annum from the specified date to the date of payment. Section 3(5) is a very different provision. It does not deal with the interest paid on the arrear of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon. Now the interest payable on an arrear of cess under s. 3(3) is in reality part and parcel of the liability to pay cess. It is an accretion to the cess. The arrear of cess " carries " interest ; if the cess is not paid within the prescribed period a larger sum will become payable as cess. The enlargement of the cess liability is automatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made under s. 3(7). Although the manner of recovery of a penalty provided by s. 3(7) is the same as the manner for recovery provided by s. 3(6) of the arrears of cess, the Legislature dealt with it as something distinct from the recovery of the arrears of cess including interest. In truth, the interest provided for under s. 3(3) is in the nature of compensation paid to the Government for delay in the payment of cess. It is not by way of penalty. The provision for penalty as a civil liability has been made under s. 3(5) and for penalty as a criminal offence under s. 4. The Delhi High Court proceeded entirely on the basis that the interest bore the character of a penalty. It was, according to the learned judges " penal interest ". The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61, does seem to be in pari materia with s. 3(3) of the Cess Act. But we think we should resist the blandishment to sit in judgment over that decision when it is not in appeal before us. We are concerned solely with the nature of the liability to pay interest under s. 3(3) of the Cess Act. A court should be slow to succumb to the temptation of deciding questions on the construction of a statute not directly before it. In our opinion, the interest paid under s. 3(3) of the Cess Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under s. 10(2)(xv) of the Indian I.T. Act, 1922, the assessee is entitled to succ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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