High Court Of Delhi
Raj Narain Agarwal vs. CIT
Sections 37(1), 57(iii), 256
Asst. Year 1971-72
D.K. Jain & Ms. Sharda Aggarwal, JJ.
IT Ref. No. 95 of 1978
1st August, 2002
Counsel Appeared
C.S. Aggarwal with Salil Aggarwal & Prakash Kumar, for the Petitioner : R.D. Jolly with Ms. Rashmi Chopra & Ajay Jha, for the Respondent
JUDGMENT
D.K. JAIN, J. :
Civil Misc No……../2002 Let a number be assigned to the application. By this application the petitioner prays for bringing on record the legal representatives of the deceased assessee, namely, Shri Raj Narain Agarwal.
For the reasons stated in the application, it is allowed and the legal representatives of the deceased assessee are brought on record. Let the amended memo of parties’ names be filed during the course of the day. Application stands disposed of. IT Ref. No. 95/78
4. The Tribunal, Delhi Bench ‘C’, New Delhi, has referred under s. 256(1) of the IT Act, 1961 (for short the ‘Act’), the following question for our opinion : “Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the disallowance of Rs. 41,689 being the interest payable by the assessee to the IT Department under ss. 220(2) and 217 of the IT Act, 1961 ?”
5. Briefly stated, the material facts are : While framing assessment for the asst. yr. 1971-72, the ITO noticed that the assessee had disclosed an income of Rs. 33,901 from interest. This included a sum of Rs. 15,250 as interest on deposits and Rs. 18,651 as interest received from the IT Department on belated refund. Against the said interest received, the assessee had claimed a deduction of Rs. 41,689 as interest payable by him under ss. 220(2) and 217 of the Act to the IT Department in respect of various assessment years. The ITO disallowed the said deduction on the ground that it was penal in nature and also not incidental to the business of the assessee.
Aggrieved, the assessee preferred an appeal to the AAC but without success. The assessee carried the matter in further appeal to the Tribunal. The Tribunal affirmed the view taken by the lower authorities by observing that the assessee had failed to show that the interest paid by him to the IT Department was an expenditure laid out or made wholly and exclusively for the purpose of its business. The Tribunal thus, held that the assessee was not entitled to claim the said interest as business expenditure under s. 37(1) of the Act. On an application being moved by the assessee under s. 256(1) of the Act, the Tribunal has referred the aforenoted question.
We have heard learned counsel for the parties. It is contended by Mr. Aggarwal, learned counsel for the assessee, that the assessee is entitled to claim the said amount as deduction while computing its interest income under s. 56 of the Act. It is urged that none of the authorities below has gone into this question though it was raised before them. As regards its allowability under s. 37(1) of the Act, Mr. Aggarwal very fairly states that in view of the decision of the Supreme Court in Bharat Commerce and Industries Ltd. vs. CIT (1998) 145 CTR (SC) 340 : (1998) 230 ITR 733 (SC) : TC S17.1878, the interest paid cannot be allowed as business expenditure. On the other hand, Mr. R.D. Jolly, learned senior standing counsel for the Revenue, has submitted that it is evident from para 10 of the order of the Tribunal that it has proceeded on the basis that the assessee had claimed the said interest as business expenditure. Though we feel that there may be some substance in the contention of learned counsel for the assessee but having regard to the fact that none of the authorities below has examined the question from the angle, it is now being projected for the first time, we are of the view that it will not be proper for us to go into a new issue at this juncture. It is also pertinent to note that in his application under s. 256(1) of the Act, the assessee had proposed the following two questions :
“1. Whether the Tribunal was justified in upholding the disallowance of the claim of Rs. 41,689 or part thereof, while computing the income of the assessee for the asst. yr. 1971-72 ?
2. Alternatively, whether on the facts and in the circumstances of the case was the Tribunal justified in law in not allowing the claim of the assessee of Rs. 41,689 within the meaning of s. 57 (iii) of the IT Act ?”
However, the Tribunal while referring the aforenoted question has not even commented on the second question proposed by the assessee, perhaps for the reason that it did not arise out of the order. We feel that if the assessee had any grievance with the order of the Tribunal regarding non-consideration of his plea relating to s. 57(iii) of the Act, he could have taken recourse to further proceedings in accordance with law. But nothing was done in that behalf. Be that as it may, we feel that it is not a fit case where we should now go into the controversy, sought to be raised before us by learned counsel for the assessee.
8. In view of the decision of the Supreme Court in Bharat Commerce & Industries’ case (supra), the question referred is answered in the affirmative, that is in favour of the Revenue and against the assessee.
The reference stands disposed of in the above terms.
[Citation : 259 ITR 720]
