Bona fide dispute over exemption claim bars interest on assessed tax where liability itself remains contested.

Interest under section 8(1) of the U.P. Trade Tax Act was not sustainable where the dealer bona fide disputed tax liability on the basis of a pending exemption claim under section 4A. The dealer had established a new unit and sought exemption, and although the claim had been rejected, its entitlement remained under revision. The Tribunal found, as a matter of fact, that the dispute was genuine and that there was nothing to show the exemption claim lacked bona fides. On that footing, interest on the assessed amount could not be treated as payable on admitted tax, and deletion of the interest demand was upheld.

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Issues: Whether interest under section 8(1) of the U.P. Trade Tax Act, 1948 was payable when the dealer had bona fide disputed its tax liability on the basis of a pending claim for exemption under section 4A of the Act.

Analysis: The dealer had set up a new unit and sought exemption under section 4A of the Act. The exemption claim had been rejected, but the dispute regarding entitlement to exemption was still pending in revision. On these facts, the Tribunal found that the dealer was bona fide contesting the tax liability and that there was nothing to show the exemption claim was not genuine. That finding was treated as a finding of fact. In similar circumstances, interest under section 8(1) was held to be unjustified where the liability itself was being bona fide disputed.

Conclusion: Interest under section 8(1) was not leviable, and the deletion of interest by the Tribunal was upheld.

Ratio Decidendi: Where a dealer bona fide contests tax liability and the exemption claim is genuinely under dispute, interest on the assessed amount cannot be sustained as payable on admitted tax.

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