SATISH CHANDRA, C.J. :- One of the questions which arose in this reference was whether interest paid on arrears of sugarcane purchase tax was an allowable deduction. At the hearing of this reference learned counsel for the assessee placed reliance on M/s. Kamlapat Moti Lal v. Commr. of Income-tax, 1975 UPTC 408 : (1975 Tax LR 1036) in support of his submission that interest so paid was a deductible expenditure.

2. The Bench hearing this reference felt that M/s. Kamlapat Moti Lal s case (1975 Tax LR 1036) (All) requires reconsideration. It hence referred the case to a Full Bench. That is how the matter has come up before us.

3. In Kamlapat s case (1975 Tax LR 1036) this Court laid down two main propositions.-

(1) The U. P. Sugarcane Purchase Tax Act did not call interest as penalty. It made provision for interest as well as penalty separately, and it also made independent provisions for their recovery. Interest was not penalty. In carrying on a business an assessee may not be able to discharge his financial commitments in time, and as a result may become liable to pay damages or interest. Such a situation is a normal incident of business, and any loss incurred by an assessee u