Sudhindra Mohan Guha, J. - (1.) In the present reference under Section 256(1) of the Income-tax Act, 1961, a very short point calls for our determination, namely, " whether the delayed payment of cess is allowable as business expenditure ? "
(2.) This reference relates to the assessment years 1967-68 and 1969-70 and the corresponding accounting period ended on 30th September, 1966, and 30th September, 1968, respectively. The assessee carries on the business of manufacture and sale of sugar. The sugar factory is situated at Harknua in the district of Saran, North Bihar.
(3.) Since the assessee did not pay the cess within the due date, the Bihar Government charged interest for the delayed payment of cess. The assessee-company claimed such interest amounting to Rs. 45,102 in the assessment year 1967-68. It also claimed Rs. 66,000 in the assessment year 1969-70 as admissible deductions before the Income-tax Officer. It was, however, held by the Income-tax Officer that the delayed payment of cess could not be treated as normal incident to the assessee's business and the levy of interest for irregular payment of cess was in the nature of penal measure. The claims preferred by the assessee for the assessment years 1967-68 and 1969-70 were disallowed.;