COMMISSIONER OF INCOME TAX Vs. SYNDICATE BANK

JUDGEMENT

(1.) IN this reference at the instance of the Revenue for the assessment year 1987-88, the Tribunal has referred the following three questions for the opinion of this court :

(2.) ON a perusal of the statement of case as provided by the Tribunal it appeared that the Revenue had initially sought for referring as many as six questions for the opinion of this court. However, the Tribunal finding that two of the questions being academic in nature, inasmuch as similar questions had been answered by this court earlier did not deem it fit to refer the same. In respect of the other four questions the Tribunal has thought it fit to refer as is now referred for our opinion.

(3.) THE facts leading to the third question that has been referred for our opinion are that the assessee in the course of its banking activity is governed and regulated by the provisions of the Banking Regulation Act, 1949, and it is imperative that the assessee was required to comply with the provisions of Section 24 of this Act in the course of its business activities and for having not complied with the same had been levied with the penal interest under the provisions of Section 24(4)(a) of this Act which in all amounted to a sum of Rs. 10,37,035 during the accounting period relevant for the assessment year in question. It is the case of the assessee-bank that this amount paid by way of penal interest for certain infractions of the provisions of the Banking Regulation Act, 1949, being incidental and in the course of the business activities of the assessee and which was beyond the control of the assessee, should be allowed as a deductible expenditure under the provisions of Section 37 of the Act. THE Assessing Officer having disallowed this claim of the assessee also, the assessee questioned this action in the appeal before the Appellate Commissioner and the Appellate Commissioner had accepted the stand of the assessee following his similar decisions for earlier years and the appeal of the Revenue on this aspect before the Tribunal also having met with the same fate as the other issues and the Tribunal holding that it had consistently allowed such penal interest as deductible expenditure in respect of assessments for the earlier years, it finds no reason to deviate from such view for the assessment in question. However, the Tribunal has thought it fit to refer the question of law on this aspect for our opinion rejecting the assessee's contention that as the Revenue had not sought for referring such a question for the opinion of the High Court for the earlier years they cannot do so for the assessment year in question.