TMI Blog1971 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... his claim and held that the assessee was not entitled to claim it as a permissible deduction under the Act – held that the interest on belated tax payment is not deductible under section 10(2)(xv) - - - - - Dated:- 7-9-1971 - Judge(s) : D. K. MAHAJAN., H. R. SODHI. JUDGMENT The Income-tax Appellate Tribunal, Chandigarh Bench, have referred the following question of law for our opinion : "Whether, on the facts and in the circumstances of the case, the interest of Rs. 6,733 was a permissible deduction as a revenue expenditure?" The assessee is a private limited company. It manufactures woollen cloth and carpets. These items are also exported out of India. In the year 1966-67, the assessee could not pay the provisional demand of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely. The assessee took up the matter in further appeal to the Income-tax Appellate Tribunal and the Tribunal allowed the assessee's claim. On this part of the case, the Tribunal made the following observations : "Thus, the income-tax paid is not an admissible charge only because of this prohibition (section 40). We find that there is no prohibition on allowance of interest. Interest and tax, in our opinion, are two different items of altogether different character and apparently there is no prohibition against allowance of interest. Incidentally, we may point out that when an assessee receives any interest on the excess amount paid under the advance tax payments, such interest is included in the total income. We think that such inclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an expense incurred "for the purpose of business". It was held that the payment of commission could not be claimed as a permissible deduction inasmuch as "stay of recovery of tax has nothing to do with the carrying on of the business of the assessee, nor has it anything to do with its purpose". Mr. Bajaj, learned counsel for the assessee, basing himself on the decision of the Supreme Court in Commissioner of Income-tax v. Malayalam Plantations Ltd., contends that the amount of interest in question is a business expense. It is maintained that if the tax, the amount of which was heavy, had not been paid the business of the assessee would have been jeopardised. In order to raise money to pay the tax and save the business, interest had to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners of the shares paid the sums payable by the legal representatives of the deceased shareholders. The payments have nothing to do with the conduct of the business. The fact that on his default, if any, in the payment of the dues the revenue may realise the amounts from the business assets is a consequence of the default of the assessee in not discharging his statutory obligation, but it does not make the expenditure any the more expenditure incurred in the conduct of the business. It is manifest that the amounts in question were paid by the assessee as a statutory agent to discharge a statutory duty unconected with the business, though the occasion for the imposition arose because of the territorial nexus afforded by the accident of its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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