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TMI Blog1986 (5) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... t year involved is 1977-78 for which the previous year ended by 31-7-1976. The assessment for the abovesaid assessment year was completed under section 143(3), read with section 144B of the Income-tax Act, 1961 ('the Act') by means of the assessment order dated 28-7-1979. At para 7 of the assessment order the following is held by the ITO: "Compulsory deposits relating to the employees of the company collected by the company was payable to the appropriate authority within a stipulated period. As such, the company had to pay penal interest to the extent of Rs. 67,824. This is not an expenditure incurred by the assessee for earning the income. This was incurred to overcome an omission or default on behalf of the company. This is not an allowable expenditure. The addition on this account comes to Rs. 67,824." 4. Aggrieved the assessee-company carried the matter in appeal before the Commissioner (Appeals) against the said addition. The learned Commissioner (Appeals) held that the assessee-company had to pay the penal interest of Rs. 67,824 as it had delayed remittance of compulsory deposit contribution by the employees under the Additional Emoluments Act. He had applied the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the additional dearness allowance deposit account, whichever is appropriate and applicable to the deduction. Under section 7 of the Additional Emoluments Act the deposit was to carry simple interest at a rate of 2 1/2 per cent over and above the bank deposit rate. Section 8 of the Additional Emoluments Act declares that the amount deducted or credited in the ledger account of the employee in the additional wages deposit account or the additional dearness allowance deposit account shall not be included in the total income of the previous year in which it is credited. However, the amount repaid under the said Act shall be deemed to be salary paid to him in arrears. Section 9 of the Additional Emoluments Act states that the amount credited to the additional wages deposit account shall be payable at any time after expiry of one year from the appointed date whereas the amount credited to the additional dearness allowance deposit account is payable at any time after the expiry of two years from the appointed day. Under section 10 of the Additional Emoluments Act, the Central Government is empowered by notification to frame one or more schemes in relation to the amounts credited to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st also. But after realising the fine the company is under no obligation to remit the defaulted amount plus interest to the nominated authority and that discharges the liability the employer to the extent of the amount so remitted by the company. It can easily be seen that imposition of fine is a way by which the defaulted amount is realised plus interest due thereon. Section 23 of the Additional Emoluments Act is another provision designed to recover the arrears. It is as follows: "Without the prejudice to the provisions of section 14, any amount which ought to have been credited under this Act to a deposit account or remitted to the nominated authority but has not been so credited or remitted in accordance with the provisions of this Act or scheme or order made thereunder, shall be payable by the employer, together with interest due thereon calculated at twice the rate at which interest is payable under sub-section (1) of section 7, and in default of such payment, such amount, together with interest due thereon at the aforesaid rate, shall be recoverable as an arrear of land revenue: Provided that where any such amount has been recovered by the Court under sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. Similarly, payments which are opposed to public policy being in the nature of unlawful consideration for discharging an official duty otherwise than according to law, i.e., otherwise than on merits, cannot equally be recognised. 8. On the other hand, the learned counsel for the assessee canvassed for the position that there is no infraction of law involved in this case and the payment of interest is according to the provisions of the Act. It is not even a penalty. Once the time limit for remitting the amount into the deposit account or to the competent authority crossed, then the liability to pay interest automatically arises. Therefore, the present is a case which is in pari materia with interest contemplated under section 33 of the Sugarcane Cess Act, 1956, considered by the Hon'ble Supreme Court in Mahalakshmi Sugar Mills Co.'s case followed by the lower appellate authority in its impugned order. 9. Thus, having heard both sides and having due consideration to the provisions of the Act as well as respective case law cited we are inclined to agree with the contentions of the assessee's counsel. We are of the opinion that the interest paid by the assessee was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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