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TMI Blog1989 (8) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the assessee could not carry on the business after 1971-72 and until 1978-79. But, during the previous year relevant to the assessment year 1976-77, the assessee received a sum of Rs. 1,19,146 as remuneration from Messrs. Crossfield Trades for services rendered to that firm. During the accounting year, the assessee paid a sum of Rs. 86,207 being interest for the belated payment of abkari arrears and claimed the same as expenditure. The Income-tax Officer disallowed the claim for expenditure holding that no deduction could be claimed as abkari business expenditure as the business has been discontinued by the assessee. The Income-tax Officer also held that even if the assessee's business was held to be in existence during the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their finding that the applicant was an employee of Crossfield Trades ?" Questions referred at the instance of the Revenue: "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the absence of active trade in abkari during the previous year and in the earlier years amounted only to a lull in the business activity of the assessee and not a discontinuance of the assessee's business ? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of interest on the related payment (beyond the 20th) of abkari dues ?" We heard counsel. Under section 37 of the Income-tax Act, 1961, any expenditure laid out or expended wholly and exclusively for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not carry on any abkari business during the course of the year. The Tribunal also noted that the assessee continued the abkari business only up to 197l-72 and thereafter resumed activity only during the years 1978-79 and 1979-80. On account of the prohibition contained in the Kerala Abkari Shops (Disposal in Auction) Rules, the assessee could not carry on business and the assessee obtained remuneration as an employee of Messrs. Crossfield Trades during the accounting year relevant to the assessment year. That is the finding of the Tribunal. Therefore, it is obvious that the abkari business has not been carried on by the assessee. The interest paid on kist arrears, viz., an amount of Rs. 86,207, is claimed by the assessee as a business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any deduction of expenses incurred wholly or exclusively for such business arises." Under section 28 of the Act, the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year shall be chargeable to income-tax and the income so chargeable shall be computed in accordance with sections 30 to 43. Section 37 provides for the deduction of revenue expenditure. In order to get deduction under this section, the amount should be expended for the purpose of the business. The finding of the authorities is to the effect that the abkari business has not been carried on by the assessee during the previous several years. The business expenditure has to be related to a business which is taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10th and 20th of each month alone is allowed and the interest payment subsequent to the 20th day of every month cannot be allowed. He relied on the assessee's own case in CIT v. T. M. Chacko and Partners [1978] 115 ITR 40 (Ker) for holding that any interest payment after the 20th day of each month will be considered as the payment of damages and such payment cannot be allowed as a deduction. Referring to this aspect, the Tribunal held that interest payable on the arrears of kist would be an allowable deduction even if the period of default is more than the normal period allowed under the Excise Rules. It is in that context that question No. 2 was formulated, viz., whether the assessee is entitled to claim deduction of interest on the relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the remuneration received by the assessee was business income in the hands of the assessee and, therefore, the assessee could claim interest on kist arrears as business expenditure. We are not able to appreciate this argument as no such case was developed before the Income-tax Officer, Commissioner of Incometax (Appeals) or even before the Tribunal. Relevant partnership deed also has not been made part of the records. Therefore, we are not in a position to appreciate this argument. The assessee's case always had been that it continued to carry on abkari business. In the circumstances, we answer question No. 1 raised in the reference at the instance of the assessee in the affirmative, that is, in favour of the Revenue and against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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