TMI Blog1978 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer disallowed the claim. The appeals filed by the assessee were dismissed by both the appellate authorities by following the case of Mannalal Ratanlal v. Commissioner of Income-tax [1965] 58 ITR 84 (Cal). S. P. Mitra J. (as he then was), speaking for this court in the aforesaid case, held that the interest paid on a borrowed amount for payment of income-tax is not a deductible expenditure under section 10(2)(xv) of the Indian Income-tax Act, 1922. Mr. Kalyan Ray, learned counsel for the assessee, argues before us that the aforesaid case was wrongly decided by this court in view of the following decisions of the Supreme Court : (1) Commissioner of Income-tax v. Chandulal Keshavlal Co. [1960] 38 ITR 601 (SC), (2) Commissioner of Income-tax v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC), (3) Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax [1966] 59 ITR 767 (SC), (4) Travancore Titanium Products Ltd. v. Commissioner of Income-tax [1966] 60 ITR 277 (SC), (5) Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax [19673 63 ITR (SC), (6) Commissioner of Income-tax v. Birla Cotton Spinning Weaving Mills Ltd. [1971] 82 ITR 166 (SC) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of profits and the payment of taxes are not isolated and independent activities of a business. These activities are continuous and take place from year to year during the whole period for which the business continues. " And argues that the payment of income-tax is a business activity of a trader and that even if an expenditure is not directly related to the earning of income it may still be regarded as an admissible deduction as observed by the Supreme Court in the case of Sree Meenakshi Mills Ltd. [1967] 63 ITR 207 (SC), at page 213 of the report. Now, in the case of Birla Cotton Spinning and Weaving Mills Ltd. [1971] 82 ITR 166 (SC), assessments for certain assessment years were already final and investigation proceedings were started against the assessee regarding those assessment years. If the result of the said investigations went against the assessee its business would have been totally annihilated inasmuch as the assessee would have been liable to pay a huge tax for those assessment years. In those circumstances, the assessee had to incur law charges and expenses to fight out the said investigation and claimed those amounts as deductible expenditure. The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss account and, therefore, in determining the trading profits of a company the amount of income-tax is a proper charge. But there is no merit in his contention in view of sub-item (h) of item (x) of the aforesaid Schedule which specifically provides that the taxes on income cannot be included in the profit and loss account. In Maharajadhiraj Sir Kameshwar Singh v. Commissioner of Income-tax [1961] 42 ITR 774 (Pat), Ramaswami C.J., at page 778, speaking for the Patna High Court, says that " a deduction of interest on money borrowed for payment of tax is not a legitimate deduction ". At page 779 of the report, his Lordship further says: " nor can the interest payable by the assessee be claimed as business expenditure under section 10(2)(xv) of the Indian Income-tax Act, 1922 ". This court in the case of Mannalal Ratanlal [1965] 58 ITR 84 (Cal) has followed the aforesaid decision of the Patna High Court. The case of Mannalal Ratanlal [1965] 58 ITR 84 (Cal) has been followed by the Gujarat High Court in the case of Commissioner of Income-tax v. Mrs. Indumati Ratanlal [1968] 70 ITR 353, by the Punjab High Court in the case of Dalmia Dadri Cement Ltd. v. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0V applies to all assessees alike. It is also not confine to any particular source of income, nor it is based on any commercial principle or commercial expediency. Hence, to accept the argument of Mr. Ray that the interest paid on money borrowed for the payment of income-tax is a deductible expenditure under section 37(1) of the Act is to hold that with effect from April 1, 1976, an assessee whose income is taxable under section 28 of the Act is entitled to a double deduction for the same amount, namely, in the computation of his business or professional income and again in the computation of his total income and, accordingly, his contention must fail, for we are unable to impute such lack of wisdom to the legislature. However wide may be the term " commercial expediency ", an expenditure cannot be allowed as a business expenditure under section 37(1) of the Act unless it is directly or indirectly incurred or laid out wholly and exclusively for the purpose of the business, that is to say, for the purpose of carrying on or carrying out of the business. And it is futile to argue that each and every expenditure incurred by a trader is a deductible expenditure. Now, in Ashton Gas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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