Compensatory interest on certificate arrears is deductible; it is not equivalent to penal damages for statutory default.

Interest paid under section 16 of the Bengal Public Demands Recovery Act, 1913, on arrears recovered through certificate proceedings is compensatory, being charged for delayed payment of a certificated demand, and is therefore allowable as a business deduction. It is not a penal exaction because it arises from non-payment of an enforceable demand, not from breach of law. By contrast, damages under section 14B of the Employees' Provident Funds and Family Pension Fund Act, 1952, are imposed for statutory default and are penal in nature. The distinction between compensatory interest and penalty determines deductibility.

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Issues: Whether interest paid under section 16 of the Bengal Public Demands Recovery Act, 1913, on arrears recovered through certificate proceedings was allowable as a deduction in computing business income, or whether it was to be treated as damages or penalty akin to section 14B of the Employees' Provident Funds and Family Pension Fund Act, 1952.

Analysis: The interest was payable not for any infraction of law but because the certificated demand remained unpaid and the recovery machinery under the Bengal Public Demands Recovery Act, 1913, treated the certificate as enforceable in execution. The interest charged under section 16 was characterised as interest on a judgment debt and as compensation for delay in realisation, not as a penal exaction. Damages under section 14B of the Employees' Provident Funds and Family Pension Fund Act, 1952, stood on a different footing because they were imposed for breach of statutory obligation and were penal in nature.

Conclusion: The interest paid under section 16 of the Bengal Public Demands Recovery Act, 1913, was allowable as a deduction and could not be equated with damages under section 14B of the Employees' Provident Funds and Family Pension Fund Act, 1952.

Ratio Decidendi: Interest paid for delayed discharge of a certificated demand under a recovery statute is compensatory and deductible, unless the exaction is shown to be penal in nature for breach of law.

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