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TMI Blog2023 (8) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... see s business. We are of the considered view that CIT(Appeals) has correctly observed that the payment of interest was not made towards any infraction of law and therefore, the same is allowable u/s 37 of the Act. Though the principal of Res Judicata is not applicable in income tax proceedings, but, looking into the instant facts, when on identical facts similar disallowance has not been made in any of the earlier or later years by the Department, following the principle of consistency as laid down in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT ] the Department should not disallow interest payment for this year as well. We are in agreement with the contentions put forth by assessee that when on identical facts, the Department has not made any disallowance in respect of interest payments, which the assessee has been consistently paying over a period of 10 years i.e. both in the past years as well as for the future assessment years, then the Department is precluded from making disallowance on the same set of facts in the impugned year under consideration. Appeal of the Department is dismissed. - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SIDDHA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Authority in favour of the assessee on 29-06-1994. The assessee constructed a 3 star hotel on this plot of land and on the land surrounding the hotel building, a party plot Vatika was developed on 2782 m . After the passage of some years, the assessee company came under financial duress. The assessee borrowed a sum of ₹ 18.24 crores from Tourism Finance Corporation of India. Since the assessee company was under financial stress, it approached Mr Sharad Doshi, Director of Nakoda developers for financial assistance. However, to secure repayment of the loan, Mr Doshi of Nakoda developers insisted that the portion of the company s leasehold land be made available and earmarked as security in favour of Nakoda developers and his name be added is a joint lessee in the lease deed. Accordingly, on account of such demand of Mr Doshi, the assessee approached Tourism Finance Corporation of India with the request to release a portion of land from its mortgage to enable the assessee to mortgage the same to Nakoda developers as they had promised the assessee to lend certain loan against such mortgage. The arrangement was such that the assessee entered into a sale deed with Nako ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it was stated that the original sale deeds of 2004 were illegal and void, the interest which the assessee paid on ₹ 20 crores @ 9% as per Courts order cannot be allowed in view of the provisions of section 37 (1) of the Act. Accordingly, the submission of the assessee before Ld. CIT(Appeals) was that the assessee never committed an offence or any act which was prohibited by any law. What the assessee did was a violation of a commercial term of the lease deed and in order to rectify the same and protect its business interests, it entered into a compromise agreement with Nakoda developers by way of a Court Order in terms of which, the land so given to Nakoda developers was repurchased back by the assessee for a consideration of ₹ 22 crores and this interest was paid only on the unpaid principal amount computed at 9% during the year under consideration. 5. The Ld. CIT(Appeals) on appreciation the facts of the instant case agreed with the contention of the assessee that the interest paid pursuant to Court decree was not towards penalty for infraction of any law, but was a purely commercial arrangement between the assessee and Nakoda developers under a civil suit, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be allowed in respect of such expenditure. As regards interest expenditure incurred on payment of Rs. 20 Crores in terms of order of the Court which is on COMPROMISE with the said payee namely Shree Nakoda Developers, it cannot be said by any means that such interest expenditure has been paid for an offence or is prohibited by law. On the contrary, the said interest expenditure is incurred purely for the purposes of the business so as to continue to possess, use and enjoy the impugned lease hold land which is a very attractive source of revenue to the Appellant. Any interest expenditure incurred on amount borrowed for the purpose of business and to protect the assets of the business is allowable under the provisions of section 36(l)(iii). It is submitted by the Ld. Authorized Representative that the agreement under consent terms is to secure that litigation ends and the leased plots continue to earn i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to express any opinion on the decision. The case is distinguishable because we are concerned with a particular statutory scheme enacted in ss. 3 and 4 of the Cess Act before us. Our attention has also been invited to Saraya Sugar Mills (P.) Ltd. vs Commissioner of Income-tax (1979) 116 Itr 387, where a Full Bench of the Allahabad High Court has held that the payment of interest under s. 3(3) of the U. P. Sugarcane Purchase Tax Act, 1961, is a penal liability which accrues on an infraction of the law. Section 3(3) of the U. P. Sugarcane Purchase Tax Act, 1961, does seem to be in pari materia with s. 3(3) of the Cess Act. But we think we should resist the blandishment to sit in judgment over that decision when it is not in appeal before us. We are concerned solely with the nature of the liability to pay interest under s. 3(3) of the Cess Act. A court should be slow to succumb to the temptation of deciding questions on the construction of a statute not directly before it. In our opinion, the interest paid under s. 3(3) of the Cess Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees' account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(l)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(l)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the RSI Act. The ratio of this decision is very clear and against the appellant. Respectfully following this decision, the ground of appeal of the assessee is dismissed. Thus, the appellant fails on this ground. 5.0 In result, the appeal of the appellant is partly allowed. 6. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) allowing the assessee s appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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