Law: Income Tax Ordinance, 1979

Section: 136

Income-tax----Deduction---Penal interest---Such interest being in the nature of fine was not an allowable deduction and the department was right in excluding the same from the deduction claimed by the assessee. Commissioner of Income-tax v. Premier Bank Limited 1999 SCMR 1213 fol. JUDGMENT SAIYED SAEED ASHHAD, J.---This Income-tax case has arisen on the basis of an application filed by the applicant/department under section 136(2) of the Income Tax Ordinance prior to its amendment in 1997, raining a question of law and seeking the opinion of this Court thereon. The question of law is as under:--- "Whether on the facts and the circumstances of the case learned ITAT was justified in holding that penal interest was allowable under the law as business expenditure." The brief facts of the case are that in the assessment year 1988-89 the Income-tax Officer had disallowed a sum of Rs.6,72,572, which was paid by the respondent/assessee by way of penal interest to M/s Muslim Commercial Bank Limited on re-finance loan. The said disallowance was set aside and the addition of Rs.6,72,572 was deleted by the Commissioner of Income-tax (Appeals). In the second appeal filed by the applicant/department before the Income-tax Appellate Tribunal, the finding of the Commissioner of Income-tax (Appeals) was upheld and confirmed by it. Feeling aggrieved and dissatisfied with the said finding of the Appellate Tribunal, the applicant/department (sic) reference application before the Appellate Tribunal praying for referring the question of law to this Court. The Appellate Tribunal by its order, dated 19-7-1992 in R.A. No. 111/KB of 1991-92 rejected the same on the ground that it was a finding of fact and did not given rise either to the question of law framed therein…

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