TMI Blog2003 (12) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... e towards the shortfall within the maturity period is allowable as deduction under section 37 of the Income-tax Act (hereinafter referred to as 'the Act'). Elaborating this submission, the learned counsel pointed out that the amount payable by the assessee for shortfall in the maturity period was treated as additional levy by this court and therefore, the said amount partakes the character of penalty; and therefore in the light of the explanation given to section 37 of the Act, the said amount is not deduction towards the expenditure incurred by the assessee. In this connection, he referred to us the discussion made by the Assessing Officer in the order of assessment. Secondly, he submitted that though the amount paid by the assessee towards shortfall of maturity period has been treated as additional levy by this Court, the said amount should be treated either as a fee or as excise duty within the meaning of Section 43B(a) of the Act; and since the question whether additional amount should be treated as fee or excise duty, was not considered by this Court in the case of Ugar Sugar Works Ltd., the reliance placed by the Tribunal on the said decision of this Court is totally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, it cannot be contended before this Court that the issue has not been determined by the Appellate Tribunal. ain support of his submission he also relied upon a decision of the Bombay High Court in the case of COMMISSIONER OF INCOME-TAX VS. TATA CHEMICALS LTD. reported in 256 ITR 395. 4. Before we proceed to consider the contention urged by Sri Seshachala on merit, we find it is convenient to first deal with the preliminary objection raised by Sri Prasad that the Counsel for the Appellant, having not urged before the Tribunal that the payment made by the assessee towards the shortfall of maturity period is in the nature of a penalty, cannot be permitted to raise the said contention. No doubt, the contention of Sri Seshachala that the payment made by the assessee towards the shortfall of maturity period is in the nature of penalty was not urged before the Tribunal. However, the question is, whether the combined reading of sub-Section (1) (2) and 6(a) of Section 260A of the Act, on which strong reliance is placed by Sri Prasad, would support his contention. On careful consideration of Section 260A of the Act, we are unable to accede to the submission of Sri Prasad. No d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal for consideration of such a question. Therefore, as noticed by us earlier, the language employed under sub-Section (1) of Section 260A of the Act is that the case should involve a substantial question of law. the meaning attached to the words substantial question of law , in our view, should not be given a restricted meaning to understand it as should involve substantial error of law in the Order. While interpreting a provision which provides for a right of appeal, the Court should not narrow-down the scope of right of appeal provided to the parties. Sub-Section (2) of Section 260A of the Act cannot be read de-horse sub-Section (1) of Section 260A of the Act. Sub-Section (1) of the said Section confers power on the High Court to entertain an appeal against every order passed by the Appellate Tribunal. Sub-Section (2) of the said Act provides for a right to a party to an appeal. Therefore, reading of sub-Sections (1) and (2) of Section 260A of the Act make it clear that if the Appellate Commissioner or the Assessee is aggrieved by an Order passed by the Tribunal, he could prefer an appeal to the High Court provided the case involves substantial question of law. As noticed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Clauses Act. This is our interpretation on the Circular. Further, in the case of COMMISSIONER OF INCOME-TAX vs. AHMEDABAD COTTON MFG. CO. LTD., reported in 205 ITR 163, the Supreme Court while considering the question that when a mill is made liable to pay to the Central Govt. certain amount on the shortfall in its export of sanforized cloth could be considered as penalty has taken the view that though the amount required to be paid was described as penalty, having regard to the substance of the transaction between the penalty, it cannot be considered as penalty. This is clear from the observation made by the Court, which reads thus: It is no doubt true that the word used in the scheme which we have set out above for the sum to be paid in default of fulfilling the export obligation has been described as a penalty but in the ultimate analysis it is the substance of the transaction of the transaction between the parties which has to be considered for purpose of determining what is the nature and import of the scheme and the bond executed in pursuance thereof. The exercise of option, as stated above, may be the result of commercial expediency as well as certain extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le (8) of Rule 15 of the Rules stated that the payment made is towards the cost of the labels to the Goverment, as contended by Sri Seshachala? In our view, there is also no merit in this submission of the learned Counsel for the Appellant. Sub-Rule (8) of Rule 15 of the Rules imposes an obligation on every licensee, to have the sealed bottles affixed with excise label at his cost, in the presence of the Warehouse Officer, and not to take out any bottle without excise label being affixed, from the warehouse. However, the said Rule confers discretion on the Commissioner, on an application being made by the licensee, to allow release of the bottled arrack for sale without labels on payment of cost of labels to the government, in case, if he is satisfied that the labels were not available. It is useful to extract the said Rule, which reads as hereunder: The sealed bottles shall have in addition an excise adhesive label and no bottle without excise label shall be issued from the warehouse. Such labels shall be affixed by the licensee at his cost in the presence of Warehouse Officer. In case for any reason labels are not available, the commissioner may, on an application, allow rel ..... 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