1. ' KASLIWAL, J.--The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law for the opinion of this Court: "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 was an admissible deduction under Section 37 of the Income-tax Act, 1961?"
2. ' In Rajasthan Central Stores (P.) Ltd. v. C I T (1985) 156 I T R 90 (Raj.), a Division Bench of this Court was called upon to give its opinion on the following question of law.
3. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions for payment of penal interest amounting to Rs,5,050 on sales tax collections withheld by the assessee and utilised for the purpose of its own business, was not admissible as a deduction in computing its total income?"
4. ' While deciding the above question, several cases of the High Courts and the Supreme Court were considered by the Bench. In Mahalakshmi Sugar Mills Co. v. C I T (1980) 123 I T R 429, the Supreme Court had considered the provisions of the U.P. Sugar Cane Cess Act, 1956. Section 3(3) of the said Act provided that any arrear of cess not paid on the date prescribed under subsection (2) shall carry interest at 6% per annum from such date to the date of payment. The Supreme Court in the above case held that the interest that was paid under Section 3(3) of the Cess Act could not be described as a penalty paid for an infringement of the law and that it was in the nature of revenue expenditure in respect of which the assessee could claim deduction under Section 10(2)(x%) of the Indian Income-tax Act, 1922. The Bench of this Court placing reliance on the above Supreme Court case held that the Tribunal was not right in law in holding that the provision for payment of interest amounting to Rs,5,050 on sales tax collection withheld by the assessee and utilised for the purpose of its own business was not admissible as deduction in computing its total income. The question was, therefore, answered in the negative.
5. We agree with the view taken by this Court in the above referred Rajasthan Central Store (P.) Ltd's case (1985) 156 I T R 90 (Raj.). In the result. A the above-mentioned question of law referred to us is answered in the affirmative and against the Revenue.