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TMI Blog1978 (4) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... d payment. The amount of interest so paid was Rs. 11,154 for the assessment year 1969-70, Rs. 38,572 for the assessment year 1970-71, and Rs. 28,792 for the assessment year 1971-72. In the original assessment, deduction was allowed to the assessee in respect of these payments of interest in the computation of income from the business of the assessee. But later on, the Income-tax Officer acting in pursuance of the judgment of the Delhi High Court in Commissioner of Income-tax v. Mahalaxmi Sugar Mills Ltd. [1972] 85 ITR 320 reopened the assessments and held that these amounts by way of interest cannot be regarded as legitimate deductions, laid out or expended " wholly and exclusively for the purpose of the business " under section 37 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the delay in payment of 'kist' to the Government by the assessee is an expenditure laid out wholly and exclusively for the purpose of business ? " The question has got to be decided with respect to section 37 of the Income-tax Act, 1961. That section, in so far as it is material, reads : " 37. (1) Any expenditure not being expenditure of the nature described in sections 30 to 36 and section 80VV and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head ' Profits and gains of business or profession '." There was no controversy that it would be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition to, the duty or tax leviable under sections 17 and 18. (2) No grantee of any privilege under sub-section (1) shall exercise the same until he has received a licence in that behalf from the Commissioner." Section 28 of the Act is as follows : " 28. Recovery of duties.---All duties, taxes, fines and fees payable to the Government direct under any of the foregoing provisions of this Act or of any licence or permit issued under it, and all amounts due to the Government by any grantee of a privilege or by any farmer under this Act or by any person on account of any contract relating to the Abkari revenue may be recovered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be payable on or before the 10th day of each calendar month beginning from 1st April, 19...... In case of failure interest will be charged from the 11th. But no cancellation of the licence or resale of the shop shall be ordered until after the 20th day of the month. In the case of resale of shops due to failure of payment of security deposit, the original purchaser is liable to pay interest at 9 per cent. on loss by the resale amount, if any, due from him from 1st April, 19 ........" It will be seen from the provisions of the statute and of the statutory licence granted to the assessee that the rental or the kist as it is called, is liable to be paid in instalments on or before the 10th day of each calendar month, beginning from the 1st o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an infraction of the law cannot give rise to an allowable deduction under the provisions of the Act. Then we have the decision of the Delhi High Court in Commissioner of Income-tax v. Mahalaxmi Sugar Mills Ltd. [1972] 85 ITR 320, which again related to the claim for penal interest for penalty for non-payment of cess on sugarcane. Our attention was also called by the counsel for the revenue to Additional Commissioner of Income-tax v. Rohit Mills Ltd. [1976] 104 ITR 132 (Guj). That again related to betterment charges and penalty for non-payment of the same, in respect of which certain disabilities were visited on the assessee which sought deduction under the Income-tax Act. We have examined these decisions carefully ; and we are of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. In paying interest between the 10th and the 20th of the month, the assessee commits no wrong, and no infraction of the law ; and the payment of interest, in the circumstances, constitutes an expenditure incurred wholly and exclusively for the purpose of the business. Payment of rental was necessary to carry on business as abkari contractor and the mode of payment under clause 27 of the licence contemplates and permits payment of interest, if paid between the 11th and 20th of the month. In that view, we are of the opinion that the principle of the decisions cited to us has no application and the Tribunal was right in having allowed the assessee's claim for deduction. Counsel for the revenue raised before us a certain point which h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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