Commissioner of Income Tax vs E.L. Properties (P.) Ltd.

This is an application for confirmation of rule. The Income Tax Appellate Tribunal allowed in this case a deduction of Rs. 65,653, which was interest payable by the assesses in respect of unpaid municipal rates due to the Calcutta Municipal Corporation.

The Income Tax Appellate Tribunal reversed the decision of the Assessing Officer and the Commissioner of Income Tax (Appeals).

It is settled beyond dispute that interest on late payment of municipal rates is not in the nature of a payment of penalty, and is thus clearly deductible as general business expenses u/s 37.

The requirement of section 43B that even for assessees following the mercantile system, payments by way of tax, duty, cess, etc., cannot be claimed as deductions unless actual payment has been made in the previous year, is also not applicable in this case, because the words of the section encompass the municipal rates, but not interest thereon.

There are binding authorities for this proposition, so far as we are concerned (see Commissioner of Income Tax Vs. Padmavati Raje Cotton Mills Ltd., and Hindustan Motors Limited Vs. Commissioner of Income Tax, .

Confirmation of rule would thus be an empty exercise. Rule is thus discharged.

Parties and all others concerned to act on a signed copy of this order on the usual undertakings.