ITAT allows deduction for interest on late MVAT payment under sec. 37(1)

The ITAT allowed the appeal, reversing the decisions of the lower authorities, and held that interest on late payment of MVAT is an allowable deduction u/s.37(1) of MVAT Act, 2002. The judgment addressed the disallowance of interest on late payment of MVAT Act, 2002 claimed by the assessee, with the ITAT ruling in favor of the assessee based on legal precedents supporting the deduction of such interest as a business expense.

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Issues Involved: Disallowance of interest on late payment of MVAT Act, 2002 claimed u/s.37(1) of MVAT Act, 2002.

Summary:

Issue 1: Disallowance of Interest on Late Payment

The assessee appealed against the order of the ld CIT(A) -II, Thane, which disallowed the interest on late payment of MVAT Act, 2002 amounting to &8377; 6,41,348. The AO contended that the payment was due to default in making statutory dues on time, hence not for the purpose of business. The assessee argued that the delay was due to the newness of the business and late realization of funds from creditors. The CIT(A) upheld the AO's decision. The ITAT observed that the assessee paid simple interest on self-assessment basis as prescribed in the Act. Citing legal precedents, including judgments by the Supreme Court and High Courts, the ITAT held that interest on late payment of MVAT is an allowable deduction u/s.37(1). Consequently, the ITAT allowed the appeal, reversing the decisions of the lower authorities.

This judgment addresses the issue of disallowance of interest on late payment of MVAT Act, 2002 claimed u/s.37(1) of MVAT Act, 2002. The assessee's appeal against the disallowance was successful based on legal precedents supporting the deduction of such interest as a business expense.

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