TMI Blog1989 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of business or profession' ?" The facts of the case are these. The assessee is a company. For the assessment year 1972-73, the assessee filed a return along with the profit and loss account which showed net profit of Rs. 1,88,500. 10. In computing its net profit, the assessee deducted a sum of Rs. 29,320 being the interest paid by the assessee to the Department on various counts, namely, late filing of return mention of which has been made in section 139 of the Act, the shortfall in the payment of advance tax covered by section 215 of the Act and failure to make estimate, interest for which is chargeable as per section 217 of the Act. The Income-tax Officer disallowed the deductions claimed. The assessee appealed to the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription of the levy. It was further pointed out that having regard to the reason for the levy and the circumstances under which it is imposed, it is clear that interest is charged by way of compensation and not by way of penalty. It was then stated that the Act makes clear distinction between the levy of a penalty and other levies under that statute. It was opined that interest is levied under sections 139(8) and 215 because, by reason of the omission or default in question, the Revenue is deprived of the benefit of the tax for the period it has remained unpaid. Because of the aforesaid decision, the view taken in some cases, viz., Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350 (SC) and Indian Aluminium Co. Ltd. v. CIT [1971] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53 ITR 275 (Delhi) also, it was held that interest paid due to delay in payment of tax would not be deductible ; but this view was taken by stating that interest would be part and parcel of the liability to pay income-tax. Since income-tax paid by the assessee is not a permissible deduction in view of what has been laid down in section 40(a)(ii), the interest paid for delay in payment of tax would also not be a permissible deduction as the interest would take the colour of the original amount liable to be paid as income-tax. While coming to the aforesaid conclusion, the Delhi High Court had relied, inter alia, on the decision of the apex court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429. In that case, the Supreme Court was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egular assessment. We may state that due to the failure to file returns in time, the Revenue loses the amount of tax due as per the return and so by charging interest, it enlarges its receipt, i.e., augments the amount of tax. In so far as interest levied under sections 215 and 217 of the Act is concerned, that has a direct connection with the amount payable as advance tax, by charging interest on which the corpus of the tax amount is enlarged. So, in all these three cases, interest paid has to be regarded as part and parcel of the liability to pay tax. Now, if, under section 40 (a) (ii), any sum paid on account of tax is not deductible, we would think that the same should be the position with regard to payment of interest under the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1980] 123 ITR 429 (SC), which was followed in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 (Cal) and Triveni Engineering Works Ltd. v. CIT [1983] 144 ITR 732 (All) I FBI. As the payment of sales tax which was under consideration in Rajasthan's case [1985] 156 ITR. 90 (Raj) and for that matter, other takes coming up for consideration in the Calcutta and Allahabad cases were held as deductible expenditure, the interest paid on the same was also regarded as revenue expenditure deductible under section 37(1) of the Act. But these decisions cannot assist the assessee as payment of incometax is not deductible as per section 40(a)(ii) of the Act and so interest under sections 139, 215, and 217 which have to be regarded, for reasons given, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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