Fenner (India) Ltd. vs Commissioner of Income Tax

Thanikkachalam, J.—At the instance of the assessee, the Tribunal referred the following question for the opinion of this court u/s 256(2) of

the Income Tax Act, 1961 :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that any interest payable for delayed

payment of tax with the specific permission of the Income Tax Officer u/s 220(2) should also be considered as levied on the basis of profits and

gains just because the tax due was based on the profits or gains ?

In respect of the assessment of the assessee for the assessment year 1976-77, the assessee claimed deduction of interest paid u/s 220(2) of the

Income Tax Act, amounting to Rs. 6,104. The Income Tax Officer pointed out that two installments of interest, namely, Rs. 3,155 and Rs. 2,949

paid by way of interest u/s 220(2) of the Income Tax Act cannot be allowed as deduction. Accordingly, the Income Tax Officer disallowed the

same.

On appeal, the Commissioner of Income Tax (Appeals) relying upon the order of the Appellate Tribunal, ""D"" Bench, Bombay, in the case of

Indian Express held that such interest cannot be allowed u/s 37(1) of the Income Tax Act. The Commissioner of Income Tax (Appeals) did not

agree with the assessee and he distinguished the decision of Bombay ""D"" Bench in Bennett Coleman and Co. v. ITO - I.T.A. No. 3068/(Bom) of

1972-73. The assessee took the matter before the Appellate Tribunal. The Appellate Tribunal agreed with the reasoning given by the

Commissioner of Income Tax (Appeals) and it further pointed out that the tax which was due from the assessee was based on profits or gains and

any interest payable for non-payment of such tax should also be considered as levied on the basis of such profits or gains. So, there is no specific

deduction to the disallowance of any tax or interest. Accordingly, the appeal filed by the assessee was dismissed.

We have heard learned counsel for the assessee as well as learned standing counsel for the Department. In view of the decisions in National

Engineering Industries Ltd. Vs. Commissioner of Income Tax (Central), of the Calcutta High Court; Commissioner of Income Tax Vs. Ghatkopar

Estate and Finance Corporation (P.) Ltd., of the Bombay High Court; Federal Bank Ltd. Vs. Commissioner of Income Tax, of the Kerala High

Court; Bharat Commerce and Industries Ltd. Vs. The Commissioner of Income Tax, of the Delhi High Court; Commissioner of Income Tax,

Karnataka Vs. International Instruments (P) Ltd., of the Karnataka High Court; Saurashtra Cement and Chemical Industries Ltd. Vs.

Commissioner of Income Tax, of the Gujarat High Court; Commissioner of Income Tax Vs. Oriental Carpet Manufacturers (India) P. Ltd., of the

Punjab and Haryana High Court and Orissa Cement Ltd. Vs. Commissioner of Income Tax, Delhi, of the Delhi High Court we hold that the order

passed by the Tribunal is in order. Accordingly, we answer the question referred to us in the affirmative and against the assessee. There will be no

order as to costs.