TaxTMI 
TaxTMI 
1998 (4) TMI 89
X X X X Extracts X X X X
X X X X Extracts X X X X
....gains of the business for the assessment year 1981-82. 2. The assessee had, in the course of assessment proceedings for the assessment year 1981-82, claimed deduction of Rs. 10,542 which amount had been paid by it to the Income Tax Department as interest under Section 201(1A) of the Income Tax Act, 1961. The claim so made was rejected by the Income Tax Officer and that rejection affirmed in appeal by the Commissioner of Income Tax. The Income Tax Appellate Tribunal, however, on a further appeal by the assessee, held that the interest so paid was incidental to the business of the assessee and allowed the amount as deduction under Section 37 of the Income Tax Act, 3. Learned counsel for the Revenue submitted before us that the deduction so ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d sufficient reasons. Sub-section (1A) of Section 201 without prejudice to the provisions of Sub-section (1) provides the person who fails to deduct or remit the amount of deduction in the manner required under the Act is liable to pay interest at the rates specified in that Sub-section from the date on which tax was deductible to the date on which such tax is actually paid. 8. The liability for deduction of tax arises by reason of the provisions of the Act. Under Section 201, the consequence of failure to comply with the same renders that person liable to be deemed as an assessee in default with all the consequences attached thereto. The liability to pay interest on the amount not deducted or deducted but not paid is directly related to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come Tax and surtax by way of instalments, on income voluntarily disclosed under the Voluntary Disclosure of Income and Wealth Act, 1976, is not in any way an expense incurred wholly or exclusively for the purpose of the assessee's business. The court held that (headnote) : "When interest is paid for committing a default in respect of the statutory liability to pay advance tax, the amount paid and the expenditure incurred in that connection is not in any way connected with preserving or promoting the business of the assessee. . . The liability in the case of payment of Income Tax and interest for delayed payment of Income Tax or advance tax arises on the computation of the profits and gains of business". The court further held that (hea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... apex court in its later judgment in the case of Bharat Commerce and Industries [1998] 230 ITR 733 (SC), the cess which was considered in the case of Mahalakshmi Sugar Mills Co. [1980] 123 ITR 429 (SC) was an indirect tax payable in the course of the business of the assessee and the interest paid on the arrears of the cess took colour from the cess which was paid. 13. Learned counsel for the Revenue also referred to the decisions of the Bombay High Court in the case of Ferro Alloys Corporation Ltd. v. CIT [1992] 196 ITR 406 (Bom) and the decision of the Calcutta High Court in the case of Martin and Harris Pvt. Ltd. v. CIT [1994] 73 Taxman 555. It was held in those cases that the interest paid under Section 201(1A) of the Act was not deduct....