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Commissioner of Income-tax Vs. Western Indian State Motors - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference Application No. 6 of 1977
Judge
Reported in[1987]163ITR194(Raj)
ActsIncome Tax Act, 1961 - Sections 37(1); Rajasthan Sales Tax Act, 1954 - Sections 11B
AppellantCommissioner of Income-tax
RespondentWestern Indian State Motors
Appellant Advocate R.N. Surolia, Adv.
Respondent Advocate V.K. Singhal, Adv.
Excerpt:
- .....admissible deduction under section 117 of the income-tax act, 1961 ?'2. it is undisputed that the assessee paid a sum of rs. 35,780 as interest to the sales tax department under section 11b of the rajasthan sales tax act, 1954, on arrears of sales tax. the assessee claimed deduction in respect of the aforesaid sum againstits business income. although the income-tax officer rejected the claim of the assessee, on appeal, the appellate assistant commissioner of income-tax held that the said amount, paid by the assessee by way of interest to the sales tax department was allowable as business expenditure. the income-tax appellate tribunal upheld the order passed by the appellate assistantcommissioner. the tribunal then made a reference to this court. it is not necessary for us to elaborately.....
Judgment:

1. In this case, the following question of law has been referred to this court by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated January 31, 1976, under Section 256(1) of the Income-tax Act, 1961 :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid by the assessee to the Sales Tax Department on the arrears of sales tax under Section 11B of the Rajasthan Sales Tax Act, 1954, was an admissible deduction under Section 117 of the Income-tax Act, 1961 ?'

2. It is undisputed that the assessee paid a sum of Rs. 35,780 as interest to the Sales Tax Department under Section 11B of the Rajasthan Sales Tax Act, 1954, on arrears of sales tax. The assessee claimed deduction in respect of the aforesaid sum againstits business income. Although the Income-tax Officer rejected the claim of the assessee, on appeal, the Appellate Assistant Commissioner of Income-tax held that the said amount, paid by the assessee by way of interest to the Sales tax Department was allowable as business expenditure. The Income-tax Appellate Tribunal upheld the order passed by the Appellate AssistantCommissioner. The Tribunal then made a reference to this court. It is not necessary for us to elaborately discuss the law on the subject as the matter stands concluded by a decision of a Division Bench of this court in the case of the assessee itself, relating to the earlier year, in G. G. Sanghi v. CIT [1985] 150 ITR 95. It was held by this court that the interest payable under Section 11B of the Rajasthan Sales Tax Act was not a penalty but a revenue expenditure, which was deductible under Section 37(1) of the Income-tax Act.

3. Reliance was placed upon a decision of the Supreme Court in Maha-lakshmi Sugar Mills Co. v. CIT : [1980]123ITR429(SC) . We agree with the view taken by the Division Bench in respect of the earlier year, in the case of the same assessee and we hold that the interest paid by the assessee under Section 11B of the Rajasthan Sales Tax Act was revenue expenditure deductible under Section 37(1) of the Income-tax Act, being laid out wholly and exclusively for the purposes of business.

4. The question is, therefore, answered in the affirmative, in favour of the assessee and against the Revenue.

5. The parties are left to bear their own costs.


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