TMI Blog2000 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... owing questions were referred : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to the deduction of the interest payable on the outstanding municipal taxes thereby cancelling the order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to the deduction of the interest payable on the outstanding municipal taxes thereby reversing the order of the Commissioner of Income-tax (Appeals) ?" The reference arises out of the assessment of Orient Beverages Ltd. for the assessment years 1984-85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled appeals to the Tribunal against the order of the Commissioner of Income-tax for the assessment year 1984-85 and the order of the Commissioner of Income-tax (Appeals) for the assessment year 198889. The appeals were heard and disposed of together. The Tribunal after considering the relevant provisions held that the interest payable in respect of the outstanding municipal tax was not to be treated as an adjunct or part of the municipal taxes and, therefore, the provisions of section 43B of the Act could not be invoked for disallowing the outstanding interest. In coming to that conclusion, the Tribunal applied the principles laid down by the Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 for the purpose of finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the parties, it would not be out of place to reproduce section 43B of the Income-tax Act which is as follows : "Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest-on any loan or borrowing fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) would be applicable. Section 43B(a), as noted earlier, provides, notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. In our view, this question has been set at rest by the decision of the Supreme Court as well as by another decision of this court. In Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC) as noted hereinearlier, the Supreme Court, while considering a case under section 3(3) of the U. P. Sugarcane Cess Act, 1956, on arrears of cess payable held that the interest payable did not fall within the scope of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, is not for defiance of law and, therefore, this is an allowable deduction under the Act. At page 365 of the said decision, Sabyasachi Mukherji J., observed as follows : "The Supreme Court was of the view that interest payable on arrears of cess under section 3(3) was in reality part and parcel of the liability to pay cess. It was an accretion to the cess. The arrears of cess, according to the Supreme Court, if the cess was not paid within the prescribed period, a larger sum would become payable as cess. We have noticed the nature a of sub-section (3) of section 236 a of the Calcutta Municipal Act, which is more or less in similar terms. It is also a like expression as used in section 3(3) of the U. P. Sugarcane Cess Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The matter was referred to a third judge, Justice Prabir Kumar Majumdar (as his Lordship then was). His Lordship by his order dated February 20, 1995, agreed with the views expressed by Ruma Pal J., and held that he was not inclined to agree with the answer put forward by the Chief justice K. C. Agarwal, but, on the other hand, he accepted and agreed with the answer proposed by Ruma Pal J. There is yet another Division Bench decision of this court (CIT v. Padmavathi Raje Cotton Mills Ltd. [1999] 239 ITR 355), which also laid down the same principle following the Division Bench decision just now referred to above in the case of Hindustan Motors Ltd. v. CIT [1996] 218 ITR 450 (Cal) In the case of Pratibha Processors v. Union a India, AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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