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] 84 ITR 735, 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 , where it was held that payment of interest from amounts utilised from the overdraft of a bank for payment of tax cou

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