Pathak, J. - (1.) This appeal by certificate granted by the Delhi High Court raises the question whether interest paid on arrears of cess under section 3 (3) of the U.P. Sugarcane Cess Act, 1956 is a permissible deduction under Sec. 10 (2) (xv) of the Indian Income Tax Act, 1922.
(2.) The assessee is a public limited company engaged in the business of the manufacture and sale of sugar. In its income-tax return for the assessment year 1959-60 (the previous year being the period ending 30th June. 1958) the assesses claimed a deduction of Rs. 1,20,859/- paid as interest on arrears of cess due under the U.P. Sugarcane Cess Act, 1956. The Income-tax Officer disallowed the claim,but the Appellate Assistant Commissioner held that the payment of interest constituted a permissible deduction and this view was affirmed by the Income Tax Appellate Tribunal. For the next assessment year 1960-61, (the previous year ending 30th June, 1959), the assessee claimed a sum of Rs. 1,85,731/- paid by way of interest on the arrears of cess. The claim met with the same fortune, disallowed by the Income Tax Officer but upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. At the instance of the Revenue, the Appellate Tribunal referred the following question of law to the Delhi High Court in respect of the assessment years 1959-60 and 1960-61: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the interest of Rs. 1,20,859/- and Rs. 1,83,731/-, paid by the assessee on the arears of cess in the assessment years 1959-60 and 1960-61 respectively, as revenue expenditure -
(3.) For the assessment year 1961-62 also the previous year of which ended 30th June, 1960, the assessee claimed a deduction of Rs, 2,00,439/- on account of interest paid by it on arrears of cess. This claim also was rejected by the Income Tax Officer but allowed by the Appellate Assistant Commissioner and the Appellate Tribunal. The Revenue obtained a reference to the High Court on the question: 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the interest of Rs. 2,00,439/-, paid by the assessee on the arrears of cess, as revenue expenditure -;