Ita/267/2002 Of Commissioner Of Income Tax v. Kerala State Development Corpn

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 21ST MAY 2008 / 31ST VAISAKHA 1930 ITA.No. 267 of 2002() --------------------- ITA.241/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ------------------------------------ THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: RESPONDENT ----------------------- KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD, KOWDIAR, THIRUVANANTHAPURAM. BY ADV. SRI.M.PATHROSE MATTHAI (SR.) SRI.SAJI VARGHESE THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21/05/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.267 of 2002....................................................................Dated this the 21st day of May, 2008. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel appearing for the appellant and Sri.PathroseMathai, Senior counsel appearing for the respondent. The assessee is aGovernment of Kerala undertaking constituted essentially to promoteindustrialisation of the State. The various issues raised except questionNo.7 are covered by Division Bench judgment of this court in assessee'sown case in I.T.A. No.212/2001 dated 4.2.2008. Therefore, following thesaid judgment we dismiss the appeal on all questions raised except onquestion No.7. So far as question No.7 is concerned, the issue raised iswhether in the computation of income tax, the assessee is entitled todeduction of interest on interest tax paid. Interest tax is an admissiblededuction in the computation of taxable income. We do not think thedepartment's contention that interest on interest tax is penalty or fine.Interest is essentially compensatory in nature and partakes the character of tax itself and consequently is an allowable deduction. We, therefore, dismiss the appeal on this issue also. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge