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TMI Blog1992 (10) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... 977-78 and Rs. 43,142 in the assessment year 1978-79 being the interest payable on account of additional liability for income-tax and surtax on account of the disclosure of income made under the Voluntary Disclosure of Income and Wealth Act, 1976, under section 37 or 36(1)(iii) of the Income-tax Act, 1961 ? " Briefly stated the facts are that under the Voluntary Disclosure of Income and Wealth Act, 1976, the assessee disclosed certain income. The assessee did not pay the entire amount of tax payable under the said Act but chose, instead, to make the payment in instalments along with interest. The claim of the assessee before the Income-tax Officer was that a sum of Rs. 2,82,106 and Rs. 36,370 paid as interest in respect of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the payment of interest was made. It was contended that if the full amount of tax had been paid then the assessee would not have been able to earn income on those instalments which it chose not to pay in time but instead paid later along with interest. In our opinion, the preponderance of judicial opinion of the various courts in India has been that such a claim is not admissible as a deduction. The assessee is claiming deduction under section 37 of the Incometax Act, 1961. On first principles of income-tax, it must be shown that the said expense has been incurred wholly and exclusively for the purpose of business. The payment of interest can, under no circumstances, be related to the carrying on of any business activity of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Ltd. [1980] 125 ITR 510. In these cases of Dalmia Dadri Cement not only interest was paid on arrears of tax but one of the questions which arose for consideration was whether commission paid on the pledge of shares for borrowing money in order to pay income-tax was allowable as a deduction or not. This court came to the conclusion that the interest or commission so paid was not a permissible deduction in computing the profits of the assessee. Recently, the Bombay High Court has also come to the same conclusion in the case of Ferro Alloys Corporation Ltd. v. CIT [1992] 196 ITR 406. It was submitted by Shri Wazir Singh that the Gujarat High Court in C. J. Patel and Co. v. CIT [1986] 158 ITR 486 has taken a contrary view. In that case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for staying the enforcement and giving time for satisfying the statutory requirement which otherwise would result in the assessee exposing himself to the liquidation of his assets or facing coercive processes. " The aforesaid observations, therefore, clearly distinguish the present case from that of C J. Patel and Co. [1986] 158 ITR 486 (Guj), even assuming that the ultimate decision in Patel's case [1986] 158 ITR 486 (Guj) is correct. In the present case, the assessee had not made this payment of interest to preserve its assets and the said amount is not allowable as deduction. It has also been contended by Shri Wazir Singh that the Supreme Court in the case of CIT v. Birla Cotton Spinning and Weaving Mills Ltd. [1971] 82 ITR 166 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of section 80V which were incorporated in the Act, for a few years with effect from April 1, 1976. The said section, as incorporated, reads as follows : " In computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed for the payment of any tax due from him under this Act. " This provision was cited by Shri Wazir Singh and it was submitted that the petitioner was entitled to get the benefit thereof. We are not in agreement with this proposition. Firstly section 80V applied to a case where interest was paid on borrowed money. It was contended by Shri Wazir Singh that not paying the instalments, in effect, amounted to borrowing m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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