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Section 28(i) of the Income-tax Act, 1961 - Business loss - Allowability of - Assessment year 1972-73 - Whether payment of interest under sections 139, 215 and 217 was an allowable deduction, while computing net profits of assessee-company - Held, no FACTS While computing net profits for the assessment year 1972-73, the assessee-company deducted certain amount being the interest paid to the department under sections 139, 215 and 217. The ITO disallowed the deduction claimed. On second appeal, the Tribunal held that the interest payments were penal in nature and not an expenditure for earning profit. He, therefore, upheld the order of the ITO. On reference: HELD It is clear from section 139(8) that the interest charged under this provision is an accretion to the amount of tax found payable on the total income as determined on regular assessment. Due to failure to file return in time, the revenue loses the amount of tax due as per the return and so by charging interest it enlarges its receipt, i.e., augments the amount of tax. Insofar as interest levied by sections 215 and 217 is concerned, that had direct connection with the amount payable as advance tax by charging interest on which the corpus of the tax amount is enlarged. So, in all these three cases, interest paid had to be regarded as part and parcel of the liability to pay tax. Now if under section 40(a)(ii ) any sum paid on account of tax is not deductible, the same should be the position with regard to the payment of interest under aforesaid sections. The Tribunal was, therefore, justified in disallowing the deduction. CASES REFERRED TO Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC), Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350 (SC), Indian Aluminium Co. Ltd. v. CIT [1971] 79 ITR 514 (SC), CIT v. Oriental Carpet Mfrs.(India)(P.) Ltd. [1973] 90 ITR 373(Punj. & Har.), National Engg. Industries Ltd. v. CIT [1978] 113 ITR 252 (Cal.), Bharat Commerce Industries Ltd. v. CIT [1985] 153 ITR. 275 (Delhi), Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC), Rajasthan Central Stores (P.) Ltd. v. CIT [1985] 156 ITR 90 (Raj.), Balrampun Sugar Co. Ltd. v. CIT [1982]…

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