Interest on tax defaults is not deductible as business expenditure under section 37

Interest charged under sections 220(2), 215 and 201(1A) of the Income-tax Act was held not to constitute allowable business expenditure under section 37. The point was treated as covered by consistent earlier decisions, and no contrary authority was shown. Accordingly, the deduction claim failed and the question was answered in favour of the Revenue and against the assessee.

---

---

Issues: Whether interest levied under sections 220(2), 215 and 201(1A) of the Income-tax Act, 1961 could be claimed as a business deduction under section 37 of the Income-tax Act, 1961.

Analysis: The question stood covered by consistent earlier decisions holding that such interest payments do not qualify as allowable business expenditure under section 37. No contrary authority was shown, and the pending special leave petition against a different High Court decision did not justify keeping the reference pending.

Conclusion: The claim for deduction was not allowable under section 37, and the question referred was answered in favour of the Revenue and against the assessee.

---