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TMI Blog1989 (11) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... he Special Bench is not correct. The submissions were- (1) The Tribunal in para 2 of its order has stated that "this question is no longer res integra in view of two direct decisions of the High Court on the point, they are CIT vs. ORIENTAL CARPET MANUFACTURERS (INDIA) (P). LTD. (1973) 90 ITR 375 (P&H) and NATIONAL ENGINEERING INDUSTRIES LTD vs. CIT (1978) 113 ITR 252 (Cal)." It was submitted that this statement is not correct in view of the Supreme Court decision in the case of CIT vs. BIRLA COTTON SPINNING AND WEAVING MILLS LTD (1971) 82 ITD 166 (SC). According to him, just as in the case of BIRLA COTTON, the expenditure for the preservation of the assessee's business was allowed to be deducted, so in the case the payment of interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a deduction. He also submitted that u/s. 80V as it was in force for the asst., year before us since interest paid on money borrowed for the purpose of payment of income-tax was an allowable deduction there was no reason why interest paid on money retained by not paying tax should be disallowed. 2. The learned Departmental Representative on the other hand, submitted that according to the Supreme Court in the case of GUJARAT TRAVANCORE AGENCY vs. CIT (1989) 77 CTR (SC) 174 : (1989) 77 ITR 455 (SC) penalty was compensation and since according to the Gujarat High Court in the case of BHARAT TEXTILE WORKS vs. ITO interest under s. 220 was compensation and since penalty was not an allowable deduction so this interest payment was not an al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the purpose of the IT Act to substitute interest on unpaid tax for the tax. Just as Governments are not run on bank guarantees Ref. ASSTT. COLLECTOR OF CENTRAL EXCISE vs. DUNLOP INDIA LTD (1985) 154 ITR 172 (SC) (at a. 182) Governments are not run on interest on unpaid taxes. The reliance on the Supreme Court decision in the case of CIT vs. BIRLA COTTON SPINNING & WEAVING MILLS LTD is unjustified. That case was not concerned with the payment of income-tax. Preserving the business apparatus is certainly part of the business activity and the expenditure in relation to that may be allowed as a deduction but it is no part of business activity not to pay the tax earned as a result of business activity. The learned Departmental Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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