- (1.) BY this Reference Application under Section 256 (2) of the Income Tax Act, the Income Tax Appellate Tribunal, Delhi has referred the Reference Nos.679 & 680/Delhi/1992 for the esteemed opinion of this Hon'ble High Court on the following question: - "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct to hold that interest under section 215 is to be regarded as part and parcel of Income Tax liability and is deductible along with the Income Tax liability while computing chargeable profits of the company in accordance with the relevant provisions of the Companies Profits (Surtax) Act, 1964 -
(2.) THE brief facts of the case are that during the assessment years under consideration (1981 -82 and 1983 -84), the assessee claimed that interest charge under sections 139(8) and 215 of the Income Tax Act is excluded from the tax in the computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 but the A.O. has not allowed the claim of the assessee. However, the first Appellate Authority as well as the Tribunal have allowed the claim of the assessee by observing that the interest under section 215 of the Income Tax Act was part and parcel of the income tax and, therefore, was deductible along with the income tax while computing the chargeable profit as per Rule 2(1) of the First Schedule to the Companies (Profits) Surtax Act, 1964. Still not being satisfied the Department has moved the present References.
(3.) WITH this back ground, Sri R.K. Upadhyay, the learned counsel for the Department has justified the order passed by the A.O. He submits that as per the ratio laid down in the case of Shree Pipes Vs. Deputy Commissioner of Income Tax, 2007 289 ITR 154, the interest accrued on delayed payment of tax which is otherwise allowable as deduction under the provisions of the Income Tax Act while computing the total income is part of tax within the meaning of section 43B. The liability to interest due was not allowable. He further submits that the Hon'ble Apex Court in the case of Harshad Shantilal Mehta Vs. Custodian and others, 1998 231 ITR 871, has held that tax penalty and interest are different concepts under the Income Tax Act. The definition of "tax" under section 2(43) of the Income Tax Act, 1961, does not include penalty or interest. Neither penalty nor interest can be considered as tax under section 11(2)(a) of the Act. Therefore, the question whether the Special Court can absolve a notified person from imposition of penalty or interest after the date of notification, does not arise. In any case, interest or penalty for any action or default after the date of the notification, are not covered by the Act. A taxing statute is a code in itself for imposition of tax, penalty or interest. The remedy of a notified person who is assessed to penalty or interest, after the notified period, would be to move the appropriate authority under the taxing statute in that connection.;