COMMISSIONER OF INCOME TAX v. WESTERN INDIAN STATE MOTORS - 1985-LL-0821-2

Citation	1985-LL-0821-2
Appellant Name	COMMISSIONER OF INCOME TAX
Respondent Name	WESTERN INDIAN STATE MOTORS
Court	ITAT
Relevant Act	Income-tax
Date of Order	21/08/1985
Judgment	View Judgment
Keyword Tags	revenue expenditure • interest paid • sales tax
Bot Summary:	JUDGMENT JUDGMENT In this case, the following question of law has been referred to this court by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated January 31, 1976, under section 256(1) of the Income-tax Act, 1961. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid by the assessee to the Sales Tax Department on the arrears of sales tax under section II B of the Rajasthan Sales Tax Act, 1954, was an admissible deduction under section 337 of the Income-tax Act, 1961 It is undisputed that the assessee paid a sum of Rs 35,780 as interest to the Sales Tax Department under section 11B of the Rajasthan Sales Tax Act, 1954, on arrears of sales tax. The assessee claimed deduction in respect of the aforesaid sum against its business income. Although the Income-tax Officer rejected the claim of the assessee, on appeal, the Appellate Assistant Commissioner of Income-tax held that the said amount paid by the assessee by way of interest to the Sales tax Department was allowable as business expenditure. It was held by this court that the interest payable under section 11B of the Rajasthan Sales Tax Act was not a penalty but a revenue expenditure, which was deductible under section 37(1) of the. We agree with the view taken by the Division Bench in respect of the earlier year, in the case of the same assessee and we hold that the interest paid by the assessee under section 11B of the Rajasthan Sales Tax Act was revenue expenditure deductible under section 37(1) of the Income-tax Act, being laid out wholly and exclusively for the purposes of business. The question is answered in the affirmative, in favour of the assessee and against the Revenue.

JUDGMENT JUDGMENT In this case, following question of law has been referred to this court by Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated January 31, 1976, under section 256(1) of Income-tax Act, 1961. "Whether, on facts and in circumstances of case, Tribunal was right in holding that interest paid by assessee to Sales Tax Department on arrears of sales tax under section II B of Rajasthan Sales Tax Act, 1954, was admissible deduction under section 337 of Income-tax Act, 1961?" It is undisputed that assessee paid sum of Rs 35,780 as interest to Sales Tax Department under section 11B of Rajasthan Sales Tax Act, 1954, on arrears of sales tax. assessee claimed deduction in respect of aforesaid sum against its business income. Although Income-tax Officer rejected claim of assessee, on appeal, Appellate Assistant Commissioner of Income-tax held that said amount paid by assessee by way of interest to Sales tax Department was allowable as business expenditure. Incometax Appellate Tribunal upheld order passed by Appellate Assistant Commissioner. Tribunal then made reference to this court. It is not necessary for us to, elaborately discuss law on subject as matter stands concluded by decision of Division Bench of this court in case of assessee itself, relating to earlier year, in G G. Sanghi v. CIT [1985] 156 ITR 95. It was held by this court that interest payable under section 11B of Rajasthan Sales Tax Act was not penalty but revenue expenditure, which was deductible under section 37(1) of the. Income-tax Act. Reliance was placed upon decision of Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429. We agree with view taken by Division Bench in respect of earlier year, in case of same assessee and we hold that interest paid by assessee under section 11B of Rajasthan Sales Tax Act was revenue expenditure deductible under section 37(1) of Income-tax Act, being laid out wholly and exclusively for purposes of business. question is, therefore, answered in affirmative, in favour of assessee and against Revenue. parties are left to bear their own costs. *** COMMISSIONER OF INCOME TAX v. WESTERN INDIAN STATE MOTORS

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