Commissioner of Income Tax vs Kamani Metals and Alloys Ltd.

S.P. Bharucha, J.—This reference raises five questions. The first three questions are raised on the application of the Revenue and the fourth and fifth questions on the application of the assessee. The questions read thus:

"(1) Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in holding that the deduction of borrowed monies and debts due by the assessee as provided for in rule 19A(3) should be made only in respect of the liability of the new unit without considering the overall liability of the assessee?

(2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,10,632 being receipt on the transfer of import entitlements was a casual and non-recurring receipt and hence exempt from tax u/s 10(3) of the Income Tax Act, 1961?

(3) Alternatively, whether, on the facts an in the circumstances of the case, the said sum of Rs. 2,10,632 was capital gains and hence liable to be taxed as such?

(4) Whether, on the facts and in the circumstances of the case, the sum of Rs. 28,395, being interest paid to the Income Tax Department u/s 139 of the Income Tax Act, 1961, for late filing of the returns of income, was allowable as a deduction from the assessee''s total income?

(5) Alternatively, whether, on the facts and in the circumstances of the case, the said sum of Rs. 28,395 was allowable as a loss on the commercial principles of computing profits?"

Counsel are agreed that the answer to be given to the first three questions is covered by the decision of this court in Commissioner of Income Tax Vs. Kamani Engineering Corporation Ltd., . Following that decision, the first question is answered in the affirmative and in favour of the assessee and the second question is answered in the negative and in favour of the Revenue. Having regard to the answer given to the second question, the third question does not arise.

Now, as to the fourth and fifth questions, the facts are that, during the relevant previous year, the assessee paid an amount of Rs. 28,395 to the Revenue by way of interest levied for belated filing of its return as required by section 139 of the Income Tax Act, 1961. Before the Appellate Assistant Commissioner, the assessee claimed that it was entitled to a deduction in that behalf. The plea was turned down by the Appellate Assistant Commissioner and, in further appeal, by the Income Tax Appellate Tribunal.

Before us, it was contended that the amount of Rs. 28,395 had been incurred in the course of carrying on the assessee''s business and towards that end. It was submitted that, consequent upon the late payment of tax, the assessee had to borrow less and the benefit of such lesser borrowing was reflected in the assessee''s profits. It was also contended in the alternative that, looked at from a commercial point of view, this was a loss. It is difficult to accept any of these submissions. The obligation to file a return in time is statutory. Failure to comply with the statutory requirement entails payment of interest u/s 139. Payment of such interest cannot be considered to be an expenditure incurred in the course of running the business or a loss in the at behalf. As to the contention that a lesser amount was borrowed and the result was reflected in the profits, we have no material before us upon which we can judge the correctness of this contention.

In the result, the fourth and fifth questions are answered in the negative and in favour of the Revenue.

An application is made by counsel for the assessee for leave to appeal to the Supreme Court in so far as the answers to the second and third questions are concerned. It is pointed out that in the case of Commissioner of Income Tax Vs. Kamani Engineering Corporation Ltd., , such leave was granted. Accordingly, a certificate of fitness to appeal to the Supreme Court is granted to the assessee in respect of the second and the consequential third question.

No order as to costs.