Paripooman, J.:— At the instance of the assessee, the Income-tax Appellate Tribunal has referred the following question of law for the decision of this Court:
“Whether the Incometax Appellate Tribunal was right in holding that the interest levied on delayed payment of Incometax was not an item of expenditure allowable under S. 37(1) of the Income Tax Act?”
2. The assessee is a banking company. The respondent is the Revenue. For the assessment year 1978-79 (Year ending 31-12-1977) amongst others, the assessee claimed a sum of Rs. 28,308/- as interest paid for delayed payment of incometax due as deduction. The Incometax Officer rejected the claim. He held that the said interest is not an expenditure laid out wholly and exclusively for the purpose of business. It was confirmed in appeal, by the Commissioner of Income-tax (Appeals). In second appeal, the Appellate Tribunal held that the payment of interest by the assessee was not made in the character of a trader.
3. The interest was paid only as an assessee and nothing more. The plea for deduction was negatived. Thereafter, at the instance of the assessee, the Incometax Appellate Tribunal has referred the question of law formulated herein above, for the decision of this Court.
4. We heard counsel for the assessee/applicant Mr. Balachandran, as also counsel for the respondent/Revenue Mr. P.ICR Menon. Counsel for the assessee submitted that the interest of Rs. 28,308/- was levied by the Income Tax Officer under S. 217 of the Income tax Act. It was submitted that the assessee is a bank and by nonpayment of the incometax, the amount was available to the bank as a circulating capital and the amount so withheld from being paid to the State was available to the trading activity of the assessee and so the corresponding expenditure by way of payment of interest for such use should be considered to be an expenditure incurred for the purpose of the business of the assessee. Counsel for the Revenue contended that the decision of Courts are uniform in holding that the payment of interest made for delayed payment of incometax is not a permissible deduction.
5. We considered the rival contentions of the parties. The Appellate Tribunal has positively found that the payment of interest by the assessee was not in the character of a trader, but only as an assessee to incometax. This finding has not been challenged by framing an appropriate question in that regard. The interest paid for delayed payment oftaxwould alsobe partand parcel of the liability to pay income-tax. It is conceded that amounts paid by way of income-tax is not a permissible deduction under S. 40(a)(ii) of the Incometax Act If any sum paid on account of any income tax levied on the assessee is not a permissible deduction, the interest payable for non-payment of such tax would also assume the same role or character. It will have the same colour and content of the original amount which is liable to be paid as incometax. In this view of the matter, we are oftheviewthat interest levied or paid due to delay in payment ofincometax can never be a permissible deduction under S. 37(1) of the Incometax Act
6. We are concerned with the assessment year 1978-79. Counsel for the assessee laid stress on S. 80V of the Incometax Act which was inserted by the Taxation Laws (Amendment) Act, 1975 and whichwas in force till Finance Act, 1985. As per S. 80V of the Incometax Act, in computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed forthe purpose of any tax due from him under the Act. Counsel for the assessee submitted that if for paying incometax, amounts were borrowed and interest paid on such amount wasa permissible deduction, there is no reason why, by way of analogy, the same concession should not be extended to a case where instead of borrowing amounts to pay the incometax, amounts which could be paid as incometax, were utilised by the assessee and by delaying the payment interest became payable. We are unable to accept the said plea. By S. 80V of the Incometax Act, deduction of interest on moneys borrowed to pay taxes was allowed, in order to enable the assessee to remit incometax. It was provided as an incentive to pay the legitimate tax due. In the instant case, the deduction by way of interest is asked for, as an incentive for non-payment of legitimate tax due. We are of the view that it is not open to the assessee to place reliance on S. 80V of the Incometax Act to plead that the interest paid oin the delayed payment of incometax should be allowed as deduction. We are fortified in this view by a Bench decision of the Delhi High Court in Bharat Commerce Industries Ltd. v. Commissioner ofincometax (153 ITR 275). There are earlier decisions on this subject; of the Kamataka High Court in C.I.T v. International Instruments (P) Ltd. (144 ITR 936), Calcutta High Court in National Engineering Industries Ltd. v. C.I.T (113 ITR 252) and the Punjab and Haryana High Court in C.I.T v. Oriental Carpet Manufacturers (India) P. Ltd. (90 ITR 373). We concur with the aforesaid decisions.
7. In the above view of the matter, we hold that the Appellate Tribunal was justified in holding that the interest paid on delayed payment of intcometax was not an item of expenditure allowable under S. 37(1) of the Incometax Act.
8. We answer the question referred to us in the affirmative-against the assessee and in favour of the Revenue.
9. A copy of this judgment, under thesealofthis Court and the signature of the Registrar, shall be forwarded to the Incometax Appellate Tribunal, Cochin Bench, as required by law.
10. Dismissed.