COMMISSIONER OF INCOME TAX Vs. UDAIPUR DISTILLERY

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short " the Tribunal "), has referred the following question for the opinion of this court, which has arisen out of its order dated April 12, 1977, passed in I.T.A. No. I45/JP/76-77, in respect of the assessment year 1972-73;

(2.) IT is not necessary to recount the facts in detail, for, it is sufficient to state that the assessee had claimed interest paid on the delayed payment of sales tax as allowable expenditure under Section 37 of the Income-tax Act, 1961 (No. 43 of 1961) (for short " the Act "). The Income-tax Officer by his order dated January 24, 1975, rejected the claim of the assessee (non-petitioner) with respect to the amount, of interest paid by it on delayed payment of sales tax. On appeal, the Appellate Assistant Commissioner, in his order dated February 20/28, 1976, held that the Income-tax Officer was not justified in disallowing the assessee's claim for deduction of interest paid on the delayed payment of sales tax. He, therefore, allowed the assessee's claim in that respect. The Department filed further appeal. The Tribunal was of the view that the payment of interest on the delayed payment of sales tax is an allowable deduction as the said interest has been paid by the assessee wholly and exclusively for the purpose of its business and the payment has not been made by it in any capacity other than that of a trader. An additional reason was given by the Tribunal in support of its conclusion that the payment of interest to the Sales Tax Department on its outstanding dues is qualitatively not different from what the assessee has to pay on delayed payments to his suppliers. An application under Section 256(1) of the Act was submitted by the Commissioner of Income-tax. In the opinion of the Tribunal, a question of law arose from its order and, therefore, it has referred the aforesaid question.

(3.) IF any amount is laid out or expended or incurred wholly and exclusively for carrying on of the business, then, it is a permissible deduction under Section 37 of the Act at the time of computation of income. This expression " wholly and exclusively " has been considered by the Supreme Court in various decisions and for the limited purpose before us, it is not necessary to make a detailed reference to them and also to the decisions of the various High Courts of the country.