COMMISSIONER OF INCOME TAX Vs. VENEER MILLS PRIVATE LIMITED

JUDGEMENT

(1.) THE following question has been referred at the instance of the Revenue to this Court by the Tribunal, Guwahati Bench, Guwahati under S. 256(1) of the INCOME TAX ACT, 1961 (for short, the Act) :

(2.) THE assessee is a private limited company. The dispute relates to the asst. year 1977 -78. During the previous year corresponding to asst. year 1977 -78, assessee paid interest on the sales -tax due to the State Government under the provisions of the Assam Finance (Sales -tax) Act, 1956 as also interest for delayed payment of forest kist amount due to the Government for some prior years. Assessee claimed deduction for the amount paid as such interest. ITO disallowed deduction of this amount from the assessable income on the ground that interest was paid for delayed payment and penal in nature akin to interest under S. 220(2) of the Act and the same is not covered by S. 36(1) (iii) of the Act. The Appellate Commissioner reversed this decision and allowed deduction and this order was confirmed by the Tribunal.

(3.) THE Supreme Court in Mahalaxmi Sugar Mills Co. case (supra) considered the provisions of the UP Sugarcane Cess Act, 1956. Sec. 3 is the charging section. Sub -s. (2) requires the owner of the factory to pay cess on such date and at such place as may be prescribed. Sub -s. (3) states that any arrear of cess not paid on the date prescribed under sub -s. (2) shall carry interest at 6 per cent per annum from such date to date of payment. Sub -s. (5) authorises the authority empowered to collect the cess in case of default in making the payment of the cess to direct that in addition to the amount of the arrears and interest a sum not exceeding 10 per cent thereof shall by way of penalty be recovered from the person liable to pay the cess. Sub -s. (6) contemplates recovery of the amount of arrears including interest due from any person as if it were an arrear of land revenue. Sub -s. (7) contains a similar provision regarding recovery of penalty amount. Considering these provisions Supreme Court held :