Dipak Kumar Sen, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of Messrs. National Engineering Industries Ltd., the assessee. The following questions have been referred:
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 2,50,790 on account of interest under Sub-section (2) of Section 220 of the Income-tax Act, 1961, for delayed payment of tax dues was not an allowable deduction in the computation of total income ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, in view of the computation of loss in the assessment, the assessee was not entitled to deduction under Section 80M of the Income-tax Act, 1961 ?'
2. The facts found and/or admitted are, inter alia, that in its assessment to income-tax for the assessment year 1969-70 (the previous year ending on 31st March, 1969) a sum of Rs. 2,50,790 was claimed by the assessee as a deduction in the computation of the assessee's business income. This represented interest paid to the income-tax department on account of delayed payment of tax dues. It was contended that since the amount payable as tax was invested in business, such interest should be allowed as business expenditure.
3. The Income-tax Officer rejected this contention of the assessee and disallowed the claim holding that interest levied on account of delayed payment of income-tax was penal and, in any event, the assessee had earned sufficient profits enabling it to clear up its income-tax liabilities. On appeal, the Appellate Assistant Commissioner also rejected the contention of the assessee holding that the interest formed a part of the income-tax and, consequently, the question of allowing it as business expenditure did not arise. The assessee also raised another controversy in the appeal contending that deduction of 60% of the dividend of Rs. 13,780 received from a domestic company should have been allowed under Section 80M of the Income-tax Act before setting off the business loss from the gross income. The Appellate Assistant Commissioner also rejected this contention.
4. The assessee preferred a further appeal to the Income-tax Appellate Tribunal. The Tribunal upheld the decision of the Appellate Assistant Commissioner observing that even interest paid and amount borrowed for the purpose of payment of income-tax was not deductible from the assessee's net income.
5. In respect of the claim under Section 80M of the Act, the Tribunal found that in the computation of the total income of the assessee the Income-tax Officer had to allow deduction as specified in Sections 80C to 80U of the Act. But such deduction including deduction under Section 80M had to be allowed against total income and not only against the dividend income. The scheme of Chapter VIA was that the deductions were limited to the gross total income and not meant to be carried forward in the succeeding assessment years. The contentions of the assessee were, therefore, rejected.
6. Mr. R. N. Bajoria, the learned counsel for the assessee, cited before us a decision of the Supreme Court in Indian Aluminium Co. Ltd. v. Commissioner of Income-tax : [1972]84ITR735(SC) , where the Supreme Court held that wealth-tax paid by the assessee, a trading company, on assets held by it for the purpose of its business, was deductible as a business expense in computing the assessee's income from business.
7. On the analogy of this case Mr. Bajoria sought to argue that interest agreed to be paid on delayed payment of income-tax, the available surplus being invested in the assessee's business, should be allowed as deduction.
8. Mr. Bajoria, however, very fairly drew our attention to a decision of this court in the case of Waldies Ltd. v. Commissioner of Income-tax : [1977]110ITR577(Cal) , where it was held that payment of interest from amounts utilised from the overdraft of a bank for payment of tax could not be claimed as deduction in computing the total income of the business of the assessee, under the law as it stood before the introduction of Section 80V of the Income-tax Act, 1961.
9. Mr. Ajit Sengupta, learned counsel for the revenue, supported the case of the revenue and cited another decision of this court in the case of Balmer Lawrie and Co. Ltd. v. Commissioner of Income-tax : [1960]39ITR751(Cal) , where it was held that interest paid by an assessee under Section 18A(6) of the Indian Income-tax Act, 1922, was not interest paid in respect of any capital borrowed and was, therefore, not allowable under Section 10(2)(iii). It was further held in that case that the assessee did not incur the obligation to pay such statutory interest for the purpose of its business and the payment of such interest was in no way incidental to its business, and, therefore, the interest paid was not allowable under Section 10(2)(xv) or as a trading loss under Section 10(1) of the Act. The loss did not spring directly from the carrying on of the assessee's business and the liability was not incurred in the running of the business. The liability was imposed by the statute to which all assets were exposed, whether they carried on business or not.
10. On question No. 2, Mr. Sengupta drew our attention to the relevant statutory provisions as follows :
'80A. Deductions to be made in computing total income.--(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in Sections 80C to 80VV.
(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.'
'80B. Definitions.--In this Chapter--.....
(5) 'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under Section 280-0.'
'80M. Deduction in respect of certain intercorporate dividends.--(1) Where the gross total income of an assessee being a company includes any income by way of dividends from a domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to- (a) where the assessee is a domestic company.....'
11. Mr. Sengupta contended that the sections are quite clear and, in view of the definition of gross total income in Section 80B, the assessee was not entitled to any deduction under Section 80M before computation of the total income of the assessee.
12. It appears to us that before the introduction of Section 80V under the Taxation Laws (Amendment) Act, 1975, with effect from 1st April, 1976, the assessee had no right to claim deduction for interest paid by him on any money borrowed for the payment of any tax due from him under the Income-tax Act, 1961.
13. In view of the absence of any statutory right and in view of the decisions of this court in the cases of Balmer Lawrie and Co. Ltd. : [1960]39ITR751(Cal) and Waldies Ltd. : [1977]110ITR577(Cal) , directly on the point, we are unable to accept the contentions of the assessee. We answer the question No. 1 in the affirmative and in favour of the revenue.
14. As to question No. 2, it appears to us that the statutory provisions referred to above conclude the controversy. Undoubtedly, the assessee is entitled to deduction under Section 80M but the amount of deductions cannot exceed its gross total income under Section 80A. Such gross total income means, the total income computed in accordance with the provisions of the Act before making any deductions under Chapter VIA or deductions in respect of annuity deposit paid under Section 280-0. In the instant case such gross total income is found to be a net loss in the year concerned, because of the losses suffered during the year. Therefore, there is no question of any further deduction of 60% of the dividend earned under Section 80M. The said dividend is to be adjusted against the business loss and the net income of the assessee computed at a negative figure.
15. Accordingly, we answer question No. 2 also in the affirmative and in favour of the revenue. It is, however, made clear that in answering the question, we have neither considered nor decided the question of carrying over of looses and/or depreciation and/or development rebate from previous years.
16. In the facts and circumstances, there will be no order as to costs.
C.K. Banerji, J.
17. I agree.