1983 (7) TMI 67

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....hat the payment of Rs. 1,76,501 under section 215 and Rs. 64,340 under section 216 should be treated as a revenue outgoing and be deducted in computing the chargeable profits. In the alternative the said amount be treated on par with 'tax payable' by the assessee and be deducted in computing the chargeable profits. The ITO negatived these contentions on the ground that interest levied under the penal provisions of the 1961 Act could not be deducted as tax in computing the chargeable profits. 3. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) and contended that the term 'income-tax' includes interest and penalties leviable under the 1961 Act. It was then pointed out that in computing the charge....

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....s, even though penal interest and penalties were not deductible on the ground that they do not form the part of expression 'tax' of the same, the said payment should be considered while determining the chargeable profits on general commercial principles. 5. The learned departmental representative, Shri Deodhar, on the other hand relied on the orders of the authorities below. 6. We have carefully considered the rival submissions. In the case of Bhor Industries Ltd. it is laid down (in connection with the application of provisions of section 23A of the Indian Income-tax Act, 1922) that in ascertaining the amount deemed to be distributed as dividend, no deduction could be made in respect of interest charged under section 18A of the 1922 ....

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.... 1961, is not deductible under rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963, when computing the chargeable profits under the Super Profits Tax Act. " In the light of the above decision, therefore, the contention raised by Shri Chokshi that penal interest paid by the assessee should be treated as 'tax' must fail. 7. Now we turn to the other contention raised by Shri Chokshi to the effect that in computing the 'chargeable profits' the penal interest paid as aforesaid should be allowed as a deduction on general commercial principles. Now section 4 of the Act levies a charge on the chargeable profits of the previous year, which exceeds statutory deduction, at the rate or rates specified in the Third Schedule. The exp....