B.P. Jeevan Reddy, CJ.

1. In this case, eight questions are referred to this court, seven at the instance of the Revenue and one at the instance of the assessee. The eight questions are as under :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in holding that the interest payable on the outstanding amount of cane purchase tax was allowable expenditure in computing the total income of the assessee-company in respect of the assessment years 1971-72 and 1972-73 ?

2. Whether, on the facts and in the circumstances of the case the Tribunal was in law justified in holding that the assessee was entitled to development rebate at a higher rate of 35% as against 20% allowed to the assessee in respect of the assessment year 1971-72 ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in taw in deleting the Appellate Assistant Commissioner's direction to the Income-tax Officer to reconsider the allowability of Rs. 4,76,966 paid for bonus and allowed by the Income-tax Officer for the assessment year 1972-73 ?

4. Whether the Tribunal was in law justified in holding that, besides the allowance of Rs. 4,76,966 as bonus on payment basis, the assessee was entitled in the same year to the deduction of Rs. 5,26,873 being provision under the Payment of Bonus Act, 1965 ?

5. Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in upholding the Appellate Assistant Commissioner's order that the sum of Rs. 1,97,204 representing the difference in the price of the levy sugar charged and that fixed under the Government of India Notification dated 8.1.1971 was not includible in the asses see's income for the assessment year 1972-73 ?

6. Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in upholding the Appellate Assistant Commissioner's order allowing the assessee's claim in respect of the liability of Rs. 2,05,065 representing the difference in the purchase price of the cane during the accounting year relevant to the assessment year 1972-73 ?

7. Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in upholding the Appellate Assistant Commissioner's order that the manufacture of straw board was a priority industry and, accordingly, the assessee was entitled to the relief under Section 80-I in respect of the assessment year 1972-73 ?

8. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the interest of Rs. 15,360 paid by the assessee company to the Income-tax Department for late payment of income-tax was not an allowable deduction under the Income-tax Act, 1961, in respect of the assessment year 1971-72 ?"

2. We shall proceed to deal with them in their proper order.

Question No. 1 pertains to the deductibility of interest paid by the assessee on the arrears of cane purchase tax. It has now been held by the Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 that the interest paid by the assessee under the provisions of the U.P. Sugar Cane Cess Act, 1956, constitutes part and parcel of the debt and, therefore, constitutes an admissible deduction. In Triveni Engineering Works Ltd. v. CIT [1983] 144 ITR 732 [FB], a Bench of this court has applied the same principle to the interest paid under the U.P. Sugar Cane (Purchase Tax) Act, 1961. Accordingly, we must hold that the Tribunal was right in allowing the amount of interest. We may point out that it is only interest and not penalty. Question No. 1 is, accordingly, answered in the affirmative, i.e., in favour of the assessee and against the revenue.

3. Questions Nos. 2 and 7 go together. The question is whether the strawboard section of the assessee falls under item No. (16) of the Fifth Schedule to the Income-tax Act. If it falls, it would be entitled to higher development rebate at the rate of 35%, otherwise not.