Law: Income Tax Act, 1961

Section: 37

Income-tax----Business expenditure---Interest---Interest payable for delay in paying price of cane---Expenditure allowable---Indian Income Tax Act, 1961, S.37. Held, that the interest under section 17(3) of the Sugarcane (Regulation of Supply and Purchase) Act, 1958, was paid for delay in the payment of purchase price of raw material, i.e. sugarcane, and was clearly an expenditure allowable under section 37 of the Income Tax Act, 1961. Triveni Engineering Works Ltd. v. CIT (1983) 144 ITR 732 (All.) fol. JUDGMENT The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question of law for opinion of this Court under section 256(1) of the Income Tax Act, 1961:-- "Whether on the facts and in the circumstances of the case, was the Tribunal legally correct in holding that the interest paid under section 17(3) of the Sugarcane (Regulation of Supply and Purchase) Act, 1958, was not penal in nature for infringement of law and, therefore, it was allowable as deduction under the Income Tax Act, 1961?" The said question is stated to arise from the Tribunal's order, dated January 9, 1981, in I.T.A. No.866 (All.) of 1980 for the assessment year 1978-79. The list has been revised. None appears for the assessee-respondent. We have heard Shri A.N. Mahajan, learned standing counsel for the Commissioner of Income-tax, and perused the Tribunal's order and Annexures thereof. The assessee-respondent runs a sugar factory. For manufacture of sugar, it purchases sugarcane from the growers. The purchase of sugarcane is regulated by the Sugarcane (Regulation of Supply and Purchase) Act, 1958. Section 17 of the said Act regulates the payment of the price of sugarcane purchased by the owner of the sugar factory, and it stands as under:-- "17. Payment of cane price.--- (1) The occupier of a factory shall make such provision for speedy payment of the price of cane purchased by him as may be prescribed. (2) Upon the delivery of cane the occupier of a factory shall be liable to pay immediately the price of the cane so supplied, together with all other sums connected therewith. (3) Where the person liable under subsection (2) is in default in making the payment…

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