BHARAT COMMERCE AND INDUSTRIES LTD. versus THE COMMISSIONER OF INCOME TAX, CENTRAL-II

Citation: [1998] 2 S.C.R. 150 · Decided: 05-03-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Dismissed

Judgment (excerpt)

A 
BHARAT COMMERCE AND INDUSTRIES LTD. 
v. 
THE COMMISSIONER OF INCOME TAX, CENTRAL-II 
MARCH 5, 1998 
B 
[SUJATA V. MANOHAR AND D.P. WADHWA, JJ.] 
Income Tax-Bw1iness expenditure-Laid out wholly and exclusively 
for the purposes of business-Assessee paid advance tax under section 212 
of the Income Tax Act for assessment year 1972-7 3-lnterest levied/or delayed 
C payment under sections 139 and 215-Held, not deductible under section 
37(1) as business expenditure-Section 80V not applicable to the said 
assessment year-Income Tax Act, 1961-Sections 37, 139, 215, 212 and 
80V. 
D 
Assessee disclosing certain income under Voluntary Disclosure of Income 
and Wealth Act-Delayed payment of income tax and sur tax-Interest paid 
under section 6 of the Act-On obtaining instalments from the income tax 
department-Cannot be considered as equivalent to borrowing money frtJm 
third party-Held, such payment of interest is not an expense incurred for 
business and hence not deductible under Section BOV, 37(/) and 36(1) {iii) 
E of the Income Tax Act-Voluntary Disclosure of Income and Wealth Act, 
1976-Section 6-lncome Tax Act, 1961-Section 80V, 37(I) and 36 (J){iii). 
F 
G 
In tile first of these appeals the appellant claimed deduction of the 
interest amounts under section 37 of the Income Tax Act, 1961 in<o111pnting 
its business income. 
In the other two appeals appellant claimed deduction of interest payable 
on account of additional liability for income-tax and sur-tax on account of the 
disclosure of income made under the Voluntary Disclosure of Income and 
Wealth Act, 1976 under section 37 or 36(l)(iii) of the Income-Tax Act, 1961. 
Dismissing these appeals, this Court 
HELD : 1.1. The liability in the case of payment of income-tax and 
interest for delayed payment of income-tu or advance tax arises on the 
computation of the profits and-113ins of business. The tax which is payable 
H is on the assessee's income after the income is determined. [155-GJ 
150 
' 
•( 
BHARAT COMMERCE AND INDUSTRIES LTD. v. C.I.T. 
151 
1.2. Under Section 215 of the Income Tax Act, ifthe advance tax paid A 
is less than 75% of the assessed tax, interest as prescribed therein, is 
payable. The interest so paid for delayed payment of advance tax on such 
income cannot be considered as expenditure wholly and exclusively for the 
purpose of business. Under the Income Tax Act the payment of such interest 
is inextricably connected with the assessee's tax liability. If income-tax itself B 
is not a permissible deduction under Section 37, any interest payable for 
.., 
default committed by the assessee in discharging his statutory obligation 
"( 
under Income Tax Act, which is calculated with reference to the tax on 
income cannot be allowed as a deduction. [156-D-E] 
Smt. Padmavati Jaikrishana v. Additional Commissioner of Income-
C 
Tax, Gujarat, (1987) 166 ITR 176 and East India Pharmaceutical Works Ltd 
v. Commissioner of Income-Tax, (1997) 224 ITR 627, relied on. 
Aruna Mills Limited v. Commissioner of lnr:ome-Tax, Ahmedabad, (1957) 
31 ITR 153; Orient General Industries Limited v. Commissioner of Income-
Tax, (1994) 209 ITR 490; Commissioner of Income-Tax v. Oriental Carpet D 
Manufactureres (India) P. Ltd, (1973) 90 ITR 373 and Commissioner of 
Income-Tax, Madras v. Sundram & Company Private Ltd., (1'964) 52 ITR 
763, approved. 
Commissioner of Income-Tax, West Bengal l.v. Bir/a Cotton Spinning 
and Weaving Mills Ltd., (1971) 82 ITR 166 and Maha/aksmi Sugar Mills Co. E 
v. Commissioner of Income-Tax, Delhi, (1980) 123 ITR 429, distinguished. 
1.3. In respect of Assessment year 1972-73, Section 80V of the Act 
is not attracted because Section 80V was inserted in the Income Tax Act only 
with effect from 1st of April, 1976. (155-E] 
2.1. The tax which is required to be paid under the Voluntary 
Disclosure of Income and Weaith Act, 1976 is a tax on the declared income 
of the assessee which was not disclosed earlier and is disclosed under the 
said Act. Income-tax is payable by virtue of the said Act. It is nevertheless 
F 
a tax on income and shares all characteristics of such tax. When the assessee G 
is liable to pay interest on delayed payment of such tax, it is on account of 
his not paying income-tax within the prescribed period. The interest, which 
is payable for delayed payment of income-tax on the voluntarily disclosed 
income is of the same nature as interest on income-tax under the Income-
Tax Act. Both payments do not have any nexus wi

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