1982 (12) TMI 3 - HC - Income Tax

Deductible Late Payment Interest on Royalty to Government for AY 1964-65

The High Court of Calcutta held that interest paid for late payment of royalty to the Government of Bihar was an admissible deduction for the assessment ... Admissibility of deduction for interest on late payment of royalty - deduction in computing total income - reference under section 256(1) of the Income tax Act, 1961 - precedent application: Mahalaxmi Textile Mills Co. Ltd. v. CIT Admissibility of deduction for interest on late payment of royalty - deduction in computing total income - precedent application: Mahalaxmi Textile Mills Co. Ltd. v. CIT - The sum of Rs. 12,397 being interest paid for late payment of royalty to the Government of Bihar was an admissible deduction in computing the total income for the assessment year 1964-65. - HELD THAT: - The High Court, on a reference under section 256(1) of the Income tax Act, 1961, concluded that the Tribunal was not justified in holding the interest paid for late payment of royalty to be non deductible. The Court applied the legal principle and reasoning laid down in Mahalaxmi Textile Mills Co. Ltd. v. CIT and answered the referred question in the assessee's favour, holding that such interest is allowable in computing total income for the assessment year concerned. The Court made no order as to costs.Deduction allowed; reference answered in favour of the assessee.Final Conclusion: Reference under section 256(1) answered in the negative (in favour of the assessee): the interest paid for late payment of royalty is deductible in computing total income for AY 1964-65; no order as to costs. The High Court of Calcutta, in a reference under the I.T. Act, 1961, ruled that interest paid for late payment of royalty to the Government of Bihar was an admissible deduction for the assessment year 1964-65, based on the judgment in Mahalaxmi Textile Mills Co. Ltd. v. CIT [1980] 123 ITR 429. No order as to costs.