Satish Chandra, C.J. - (1.) ONE of the questions of law on which the Tribunal has solicited the opinion of this court is : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that interest paid on sugarcane purchase tax arrears under the provisions of U.P. Sugarcane (Purchase Tax) Act, 1961, was an allowable deduction under the Income-tax Act, 1961, and in deleting thereby the disallowance of interest of Rs. 3,08,800 ?"
(2.) THE Tribunal held that payment of interest was an allowable deduction on the basis of the decision of this court in Kamlapat Motilal v. CIT [1976] 104 ITR 783 (All). Learned counsel for the Department invited our attention to a subsequent Full Bench decision of this court in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All) [FB]. THE Full Bench overruled the Division Bench decision and held that the payment of interest was not an allowable deduction. Learned counsel for the assessee, however, invited our attention to a subsequent Supreme Court decision in Mahalaxmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC). In that case, the Supreme Court was concerned with the payment of interest on arrears of cess under Section 3(3) of the U. P. Sugarcane Cess Act, 1956. THE Full Bench decision of this court in Saraya Sugar Mills case [1979] 116 ITR 387 (All) was cited in the Supreme Court but they distinguished it holding (p. 434 of 123 ITR) : "Our attention has also been invited to Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387. where a Full Bench of the Allahabad High Court has held that the payment of interest under Section 3(3) of the U.P. Sugarcane Purchase Tax Act, 1961, is a penal liability which accrues on an infraction of the law. Section 3(3) of the U. P. Sugarcane Purchase. Tax Act, 1961, does seem to be in pari materia with Section 3(3) of the Cess Act. But we think we should resist the blandishment to sit in judgment over that decision when it is not in appeal before us. We are concerned solely with the nature of the liability to pay interest under Section 3(3) of the Cess Act. A court should be slow to succumb to the temptation of deciding questions on the construction of a statute not directly before it." It is thus apparent that the Supreme Court chose to distinguish the Full Bench decision of our court. Subsequently, the Calcutta High Court in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 (Cal), has held that the aforesaid Supreme Court decision has overruled the Full Bench decision of this court in Saraya Sugar Mills case [1979] 116 ITR 387. We, sitting as a Division Bench, are bound by the decision of a Full Bench of this court. Since we find that the Supreme Court has declined to deal with the Full Bench decision of our court but, at the same time, has expressed an opinion on the provisions of the U. P. Sugar Cess Act which are in pari materia, we think it will be feasible if this question engages the attention of a larger Full Bench.
(3.) WE, therefore, refer the question" whether the aforesaid F.B, lays down correct law", to a Full Bench of five judges. Let the papers be laid before the Hon'ble the Chief Justice for appropriate orders. JUDGMENT OF FULL BENCH Satish Chandra, C.J. One of the questions referred by the Income-tax Appellate Tribunal for the assessment year 1971-72, at the instance of the Revenue was whether interest paid on the delay in paying the sugarcane purchase tax under the U.P. Sugarcane Purchase Tax Act, 1961, was an allowable deduction under the I.T. Act, 1961.;