C.I.T. vs. HINDUSTAN SALTS LTD.

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ITR/26/1989HC RajasthanRJHC02001602198917 February 2009Bench: MOHAMMAD RAFIQ,GANDHI R C3 pages
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What did the High Court hold?

The High Court subscribed to the view taken in the case of Golcha Properties Pvt.Ltd. supra. The Court held that interest on delayed payment of income-tax, whether under Section 139(8) for late filing of return or under Section 220 for non-payment of tax, cannot be considered as expenditure incurred for the purpose of carrying on the business of the assessee. Therefore, such interest is not allowable as a business expenditure. The Reference was answered in favour of the Revenue. No issue was expressly left undecided.

What were the facts?

This is an Income Tax Reference filed by the Commissioner of Income-tax, Jaipur (Revenue) against M/s. Hindustan Salts Ltd., Jaipur (Assessee) for the assessment year 1980-81. The reference was made by the Income Tax Appellate Tribunal at the instance of the Revenue under Section 256(1)/256(2) of the Income Tax Act, 1961. The High Court was asked to provide its opinion on a specific question of law. None was present for the respondent-assessee during the hearing.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest on delayed payment of income-tax was allowable as a business expenditure? (Question of law) Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Revenue relied on the judgment of the High Court in the case of Golcha Properties Pvt.Ltd. Vs. Commissioner of Income-Tax: [1999] 209 ITR 80. In that case, the court held that interest charged by the Department under Section 139(8) for late filing of the return and under Section 220 for not paying demanded tax cannot be said to have been paid for the purpose of carrying out the business of the assessee. This point was also covered by a previous decision in Golecha Properties (P) Ltd. V. CIT [1988] 171 ITR 47.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 256(2),Section 139(8),Section 220

AI-generated summary — verify with the full judgment below

DBITR NO.26/89. 1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. O R D E R D.B. INCOME TAX REFERENCE NO.26/1989. The Commissioner of Income-tax, Jaipur Vs. M/s.Hindustan Salts Ltd., Jaipur. Date of Order:- February 17, 2009. P R E S E N T HON'BLE THE ACTING CHIEF SHRI R.C. GANDHI HON'BLE SHRI JUSTICE MOHAMMAD RAFIQ Shri R.B. Mathur for the Revenue. None present for the respondent-Assessee. ***** BY THE COURT:- This Reference has been made by the Income Tax Appellate Tribunal at the instance of the Revenue under Section 256(1)/256(2) of the Income Tax Act, 1961 pertaining to the assessment year 1980-81 seeking opinion of this Court on the following question of law:- “Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest on delayed payment of income-tax was allowable as a business expenditure?

DBITR NO.26/89. 2 2) Heard learned counsel for the applicant-Revenue. 3) Learned counsel for the applicant- Revenue has relied on the judgment of the court delivered in the case title as Golcha Properties Pvt.Ltd. Vs. Commissioner of Income-Tax : [1999] 209 ITR 80, wherein, similar question along with other four questions were referred for opinion of the court. The court while dealing with similar aforesaid question observed, as under:- “So far as question No.5 is concerned, the facts are that the assessee made a claim while computing its income in respect of interest charged by the Department under Section 139(8) of the Income-tax Act for late filing of the return of the total income and also interest charged by the Department under Section 220 of the Act for not paying the tax demanded by the Department. It was held that the said amount cannot be said to have been paid for the purpose of carrying out the business of the assessee. This point is also covered by the decision given by this court in the case of the assessee in Golecha Properties (P) Ltd. V. CIT [1988] 171 ITR 47”.

DBITR NO.26/89. 3 We subscribe the view of the court taken in Golcha Properties Pvt.Ltd. supra and answered the Reference in favour of the Revenue. (MOHAMMAD RAFIQ),J. (R.C. GANDHI),Actg.CJ. anil

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