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TMI Blog1979 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1962-63,claimed under the head 'Sundry trade expenses' while determining its business income? " This question is at the instance of the assessee. Question No. 3: " Whether, on the facts and in the circumstances of the case, the amounts of Rs. 14,649 and Rs. 8,665 being expenditure incurred by the assessee in prosecuting its income-tax appeals were allowable as deductions in determining its business profits for the assessment years 1961-62 and 1962-63 ? " This question is at the instance of the assessee. Question No. 4: " Whether, on the facts and in the circumstances of the case, the Tribunal could direct the Income-tax Officer to examine the claim of the assessee relating to the levy of interest under s. 18A(6) and reduce the interest charged to the extent that it covered the period of the pendency of the assessment for which the assessee could not be held responsible? " This question is at the instance of the Commissioner. Question No.5: " Whether, on the facts and in the circumstances of the case, the assessee-company was entitled to the development rebate on the refrigerator while determining its profits for the year 1962-63 ? " This question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in [1971] 82 ITR 166. It has been held by the Supreme Court that similar expenses which were claimed by the assessee before it were expenses incurred for the preservation and protection of the assessee's business and must be regarded as incidental to the business and necessitated and justified by principles of commercial expediency. In that view of the matter, the question will be required to be answered in the affirmative and in favour of the assessee, and further elaboration, in our opinion, does not appear to be necessary as far as this question is concerned. We must now come to question No. 1. For the purpose of answering this question a few facts will be required to be stated. The assessee before us is a limited company doing business mainly as building contractors. We are concerned, as far as this question is concerned, with the assessment years 1960-61 and 1962-63. For these two assessment years, the assessee had claimed an allowance of loss suffered by it on sale of certain Government securities. The loss suffered was Rs. 4,380 for the year 1960-61 and Rs. 7,360 for the year 1962-63. It was contended by the assessee that whilst tendering for contracts with the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, it had chosen the alternative of depositing securities which had given it interest on securities on the one hand and a small loss in the disposal of the securities on the other. On balance the company had gained by reason of the alternative adopted by it. The decision to adopt that alternative was essentially a business decision. The operation connected with the disposal of the securities was an integral part of the assessee's business operations. By no stretch of imagination could the securities be treated as the assessee's investment. For one thing, by themselves they can hardly be considered an attractive investment for a company of the kind. Nor is it possible to say that they formed a part of the permanent structure of the company. All that the company did was to earn some return from the deposits that were inevitable in a business of this kind and the loss suffered by it on one branch of the transactions was clearly connected with the business and allowable as a revenue loss. We would, therefore, allow the loss for both the years." Before us Mr. Joshi on behalf of the revenue very briefly repeated the submissions which had appealed to the ITO and the AAC. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is ground No. 32, may be fully set out ; the same reads as under : " Ground No. 32. Interest (a) The Income-tax Officer erred in levying interest under sec. 18A(6) on the appellants amounting to Rs. 77,697.51. The appellant's total income, if determined having regard to the contention raised in the above grounds of appeal, would be such that the tax paid by the appellants on the basis of their own estimate would not be less than 80% of the tax payable thereon and no interest could be levied on the appellants." Now, if this ground be read properly, the contention was obviously that there was no warrant for the levy of penal interest since the opening words of sub-s. (6) of s. 18A which alone would justify levy of penal interest were not satisfied. Thus, if the tax determined on regular assessment had been so substantially reduced in the appeal that the advance tax paid on estimate would be 80% or more of the said regular tax, then, it was the contention of the assessee that no interest as contemplated by s. 18A(6) could be levied and the portion of the order levying such interest would be entirely required to be cancelled and full relief in the matter of interest afforde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied his mind regarding the waiver of interest in this case. I feel the appellant-company is incompetent to agitate this point in the appeal before me. It is up to the appellant-company to take up the matter with the IAC if they so desire." The AAC, it seems, has approached the appeal before him in the following manner : (1) That the AAC could go into the question whether penal interest could be reduced or waived as provided by r. 48(1). The AAC, however, reaffirmed the decision implicit in the order of the ITO which was to the effect that no reduction or waiver of the penalty was called for under the said rule and accordingly full penalty was leviable. (2) As far as r. 48(5) is concerned, the AAC's view seems to be that it was for the IAC to give relief to the assessee, if so advised, under that sub-rule; and for this purpose the assessee was advised to approach the ITO, if they so desired. In the view of the AAC, he (the AAC) could not take any action under r. 48(5) and grant relief to the assessee. Being aggrieved by this portion of the AAC's order, the assessee carried the matter in further appeal to the Tribunal, where the relevant ground of appeal reads as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the several sections of the Indian I.T. Act, therein mentioned. But an order for levy of penal interest under s. 18A(6) is not one of such sections specifically provided for. The question then is whether such an order in within the compass of the words " denying his liability to be assessed under this Act " as are to be found within the phraseology employed by this section, which were the very words which came to be considered by the Full Bench in Daimler Benz case [1977] 108 ITR 961 (Bom). Before, however, dealing with the said case in further detail, brief reference may be made to r. 48 of the Indian I.T. Rules, 1922, which was relied on by the assessee in the grounds of appeal both before the AAC and subsequently before the Tribunal. Rule 48(1) and (5) are required to be fully set out and read as follows : "48. The Income-tax Officer may reduce or waive the interest payable under section 18A in the cases and under the circumstances mentioned below, namely-- (1) When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable to the assessee.. (5) Any case in which the Inspecting Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which is not covered by section 18 of the Act, that is to say, an income in respect of which there is no provision for deduction of income-tax at the time of payment. Similarly, he also decides that the assessee is a person who could not be said to be completely outside the ambit of the Act (that is to say, he is not a non-resident). Similarly, he also decides that the assessee is not in receipt of an income which is not chargeable at all (that is to say, his income is not agricultural). If, in respect of such decisions which are implicit in his action in resorting to section 18A(1) of the Act, the assessee feels that the Income-tax Officer has gone wrong, he would be an assessee desiring to 'deny his liability to be assessed under this Act' and, therefore, it would be unfair to deny him the right of appeal to the Appellate Assistant Commissioner. It does not appear to us that if after resorting to section 18A(1) the Income-tax Officer were to proceed against the assessee by way of charging penal interest on him either under section 18A(6) or under section 18A(8) for some default on his part and the assessee were minded to challenge merely the quantum of penal interest charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m appeal will be entitled to agitate in such appeal the question whether penal interest could be levied at all and whether the same has been levied in the proper amount or not. In our opinion, after the decision of the Full Bench, such larger submission is not available to the assessee in this court but the assessee is certainly entitled to canvass the same in a higher forum. If the ground taken before the AAC be read fairly, the assessee had taken a plea that no interest at all was chargeable for the reason therein mentioned. That perhaps is a ground available to the assessee in an appeal which could be filed. This, however, is not directly the subject-matter of the reference before us because, obviously, the assessee failed to succeed in establishing the requisite factual basis for the plea in the ground being upheld. Mr. Dwarkadas, however, submitted that once the assessee had filed an appeal and could be said to have properly filed the appeal on the question of levy of penal interest, in such appeal he was entitled to urge also during the course of argument that the quantum of interest was not proper either by reason of some mistake in calculation or by the failure of the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,required the ITO to consider. In the view that we have taken it was not open to the AAC to go into the question whether the ITO was right or not in considering the question whether the delay in assessment could or could not be attributable to the assessee. If that be so, the Tribunal was equally in error in holding that it could in its appellate jurisdiction direct the ITO to consider this point and give necessary relief to the assessee if in the opinion of the officer the delay in assessment was not attributable to the assessee. We do not wish to express any opinion as to whether there is any way in which the ITO or the IAC or the Commissioner can be moved by the assessee today or not. We are concerned in this reference and in the question referred to with the limited point whether such decision or refusal to take a decision on the question of waiving or reducing the interest could be the subject-matter of an appeal to the AAC and thereafter to the Tribunal. For this purpose, we have to consider the provisions of s. 30 as now interpreted by the Full Bench of the High Court in Daimler Benz case [1977] 108 ITR 961 (Bom). Applying the principles enunciated in the aforesaid Full Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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