Appeal denied for interest on tax non-payment; disallowance upheld. Interest not deductible as business activity.

The Tribunal dismissed the appeal, upholding the disallowance of interest paid under s. 220(2) for non-payment of income tax. The Tribunal emphasized that interest for non-payment of taxes cannot be considered a business activity and should not be allowed as a deduction, as it goes against the purpose of levying and collecting tax on income. Additionally, the Tribunal rejected the disallowance of Rs. 300, which was not pressed by the appellant.

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Issues:
1. Disallowance of interest paid under s. 220(2) for non-payment of income tax.
2. Disallowance of Rs. 300.

Detailed Analysis:

Issue 1: The main contention was the disallowance of Rs. 85,808 as interest paid under s. 220(2) for non-payment of income tax. The appellant argued that the interest should be allowed as a deduction, citing various cases and principles. The appellant's counsel emphasized that the interest was compensation for the retention of money and not a penalty, making it an allowable deduction. The appellant also argued that only the real income of the assessee should be taxed, and since interest was paid, it should be allowed as a deduction. However, the Departmental Representative contended that interest under s. 220 was compensation, and since penalty was not an allowable deduction, the interest payment should also be disallowed. The Representative relied on various decisions supporting the revenue's stance. The Tribunal ultimately rejected the appellant's arguments, stating that allowing interest for non-payment of taxes would go against the purpose of levying and collecting tax on income, as the Act does not intend to substitute interest for tax payments. The Tribunal emphasized that not paying tax dues cannot be considered a business activity, and interest on tax cannot be allowed as a deduction.

Issue 2: The second ground involved a disallowance of Rs. 300, which was not pressed by the appellant and was consequently rejected by the Tribunal.

In conclusion, the appeal was dismissed by the Tribunal, upholding the disallowance of the interest paid under s. 220(2) and the rejection of the Rs. 300 disallowance.

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