Hansaria, J. — The following question of law has been referred by the Income-tax Appellate Tribunal to this Court under section 256 (1) of the Indian Income-tax Act, 1961, hereinafter the Act: “Whether, on the facts and in the circumstances of the case, the interest paid by the assessee under sections 139, 215 and 217 of the Income-tax Act, 1961 was allowable as a deduction in computing the income-tax of the assessee charg­eable under the head "profit and gain of the business and profession.” 2. The facts' of the case are these. The assessee is a company. For the assessment year 1972-73 the assessee filed a return along with the profit and loss account which showed net profit of Rs. 1, 88, 500.10. In computing its not profit, the assessee deducted a sum of Rs.29, 320/-being the interest paid by the assessee to the department on various counts, namely, late filing of return mention of which has been made in section 139 of the Act, thx shortfall in the payment of advance tax covered by section 215 of the Act and failure to make estimate, interest on which is chargeable as per section 217 of the Act. The Income-tax Officer disallowed the deductions claimed. The assessee appealed to the Appellate Assistant Commissioner who disallowed the appeal on the ground that the payment of interest to the department could not be regarded as business expenditure. The appellate authority was of the further opinion that the interest levied under the Act was penal in nature and did not qualify for deduction. On further appeal to the Appellate Tribunal, the learned Tribunal came to the following conclusions: (a) the payment of interest under Section 139,215 and 217 were payments out of profit and not expenditure for earning profit. (b) such interest was not trading loss which could be taken into account under Section 28 under ordinary commercial princi­ples and (c) such interest was (i) not incurred for reducing liability to tax but in fact increased it. (ii) not incurred for preserving the business. (iii) not incurred as interest on capital borrowed for the business. (iv) not incidental to business as they related to a liability to which all assessees were exposed whether they did business or not; and (v) was penal in nature. 3. (ii) not incurred for preserving the business. (iii) not incurred as interest on capital borrowed for the business. (iv) not incidental to business as they related to a liability to which all assessees were exposed whether they did business or not; and (v) was penal in nature. 3. In assailing the view taken by the learned Tribunal it has been contended by Shri Bhattacharjee appearing for the assesee that as per the decision of the Supreme Court in Central Provinces Manganese Ore Co Ltd. vs. CIT, (1986) 160 ITR 961 (SC) the levy of the interest cannot be regarded as a penalty inasmuch as it has been held in the aforesaid decision that though the expression 'penal interest' has acquired usage, it is in fact an inaccurate description of the levy. It was further pointed out that having regard to the reason for levy and the circumstances under which it is imposed, it is clear that interest is charged by way of compensation and not by way of penalty. It was then stated that the Act makes a clear distinction between the levy of a penalty and other levies under that statute. It was opined that interest is levied under Section 139(8) and 215 because by reason of the omission or default in question revenue is deprived of the benefit of the tax for the period it has remained unpaid. 4. Because of the aforesaid decision, the view taken in some cases; Abdul Sakur, (1961) 41 ITR 350 and Indian Aluminum, (1971) 79 ITR 514 that penalty for infraction of law does not amount to expenditure for the purpose of business would not seem to stand in the way of the assessee claiming deduction of interest under Section 37 of the Act which allows any expenditure laid out or expended wholly or exclusively for the purpose of business or profession while computing income chargeable under the head "profits and gain of business or profession". This negative argument does not however, help us in answering the referred question one way or the other inasmuch as there are positive decisions of some High Courts which have held that interest paid, inter alia, for delayed payment of tax is not deductible under Section 37. This negative argument does not however, help us in answering the referred question one way or the other inasmuch as there are positive decisions of some High Courts which have held that interest paid, inter alia, for delayed payment of tax is not deductible under Section 37. In this connection Shri Talukdar draws our attention to CIT vs. Oriental Carpet Manufacturers Ltd. (1973) 90 ITR 373 (P&H) which has held that interest charged on delayed payment has no connection with the business of the assessee. It was opined in this case that liability to pay tax, though arising out of business activity, cannot be said to be in any manner a liability which has anything to do with the business of the assessee and so where an assessee is given time for payment of tax and charged interest in respect of the delayed payment such interest is not deductible as business expenditure. Same view was taken in National Engineering Industries Ltd. vs. CIT, (1978) 113 ITR 252 (Cal). In Bharat Commerce Industries vs. CIT, (1985) 150 ITR 275 (Delhi) also it was held that interest paid due to delay in payment of tax would not be deductible; but this view was taken by stating that interest would be part and parcel of the liability to pay income-tax. Since income-tax paid by the assessee is not a permissible deduction in view of what has been laid down in section 40(a)(ii), the interest paid for delay in payment of tax would also not be a permissible deduction -as the interest would take the colour of the original amount liable to be paid as income-tax. 5. While coming to the aforesaid conclusion, Delhi High Court had relied, inter alia, on the decision of the Apex court in Ma-halakshmi Sugar Mills vs. CIT, (1980) 123 ITR 429. In that case the Supreme Court was called upon to decide the question as to whether interest paid by the assessee on the arrears of cess is an allowable revenue expenditure. On the language of Section 3(3) of the U.P. Sugarcane Cess Act, 1956 it was held by the Supreme Court that the interest payableunder the aforesaid provision was not by way of penalty inasmuch as the section stated that "Any arrear of cess not paid on the date prescribed under sub-section (2) shall accrue interest of 6% per annum oh such date to date of payment". As to this type of interest which was stated to be different from the interest imposed by section 3(5) of the Cess Act it was stated that the interest payable on the arrear was in reality part and parcel of the liability to pay cess. It was opined that this type of interest was an accretion to the cess. The enlargement of the cess liability being automatic for which no specific order was necessary, it was held that, as distinguished from the liability to interest under section 3(5) of the Cess Act which was in the nature of penalty, the liability under section 3(3) of the Cess Act shall be an accre­tion to the cess-part and parcel of the liability to pay tax. We have to take the same view about interest chargeable under section 139 (8), 215 and 217 of the Act. We have said so because from the language of section 139(8) it is clear that the interest charged under this provision is an accretion to the amount of tax found payable on the total income as determined on regular assess­ment. We may state that due to failure to file return in time, the revenue loses the amount of tax due as per the return and so by charging interest it enlarges its receipt i.e. augments the amount of tax. Insofar as interest levied by sections 215 and 217 of the Act is concerned, that has direct connection with the amount payable as advance tax by charging interest on which the corpus of the tax amount is enlarged. So, in all these cases, interest paid has to be regarded as part and parcel of the liability to pay tax. Now if under section 40(a) (ii) any sum paid on account of tax is not deductible, we would think that the same should be the position with regard to payment of interest under the aforesaid sections of the Act. 6. We may add that though from what has been stated in Mahalakshmi (supra) it is not explicit whether payment of cess itself was a deductible expenditure but the same being an expenditure laid out by the Mill wholly and exclusively for the purpose of business was definitely covered by section 37 of the Act. 6. We may add that though from what has been stated in Mahalakshmi (supra) it is not explicit whether payment of cess itself was a deductible expenditure but the same being an expenditure laid out by the Mill wholly and exclusively for the purpose of business was definitely covered by section 37 of the Act. Now if cess is a deductible expenditure, as we think it to be) interest paid on arrear of cess under section 3(3) of the relevant Act has also to be regarded as a deductible expenditure in the context of the view taken about the interest payable on arrear of cess under section 3(3) of the relevant Act. But as amount of tax paid is not deductible under the Act in view of what has been stated in section 40(a) (ii), and so interest on it would also not be deductible. 7. Shri Bhattacharjee has also referred in this connection to Rajasthan Central Stores vs. CIT, (1985) 156 1TR 90 (Rajasthan) in which payment of interest on the failure of the assessee to remit the sales tax under the Government account within time was held to be per­missible deduction. This view was taken following, inter alia, decision in Mahalakshmi Sugar Mills. The Bench deciding the ease regarded the interest payable under the relevant Sales-tax Act as not much diffe­rent from the interest payable under section 3(3) of U.P. Sugar Cess Act which had come for consideration in Mahalakshmi Sugar Mills which was followed in Balarampur Sugar Company, (1982) 137 ITR 227(Cal) and Triveni Engineering Works Ltd., (1983) 144 1TR 732(Alld). As the payment of sales-tax which was under consi­deration in Rajasthan's case and for that matter other taxes coming up for consideration in Calcutta and Allahabad cases were deductible expenditure, the interest paid on the same was also regarded as revenue expenditure deductible under section 37(1) of the Act. But these decisions cannot assist the assessee as payment of income tax is not deductible as per Section 40(aXu) of the Act and so interest under Sections 139, 215 and 217 which have to be regarded, for reasons given, as accretion to tax, cannot also be allowed to be deducted. 8. But these decisions cannot assist the assessee as payment of income tax is not deductible as per Section 40(aXu) of the Act and so interest under Sections 139, 215 and 217 which have to be regarded, for reasons given, as accretion to tax, cannot also be allowed to be deducted. 8. Though Shri Talukdar brings to our notice the decision of this Court in Ganesh Das Shriam vs. ITO, (1974) 93 ITR 19 the same is not relevant inasmuch as it had laid down that for the purpose of calculating interest under Section 139(l)(iii)(a) of the Act the advance tax paid by the assessee was not deductible. The contro­versy at hand is however different. So, the fact that the decision of this Court in Ganesh Das was overruled in (1988) 169 ITR 221(SC) is of no avail to the assessee also. 9. In view of all the above, we answer the question referred to us in negative i.e. against the assessee. The delay in delivery of judgment has occurred because after the hearing was over, records of the case reached my hand only recently. J. Sangma J. — I agree.