ITAT Upholds Disallowance of TDS Interest and Travel Expenses

The ITAT upheld the disallowance of interest on TDS payments and the addition of traveling and conveyance expenses. The appeal was dismissed, affirming the AO's decision. The disallowance of Rs.9,70,248 for interest on TDS payments was supported by the Act's provisions and case law, concluding that it did not qualify as a deductible business expenditure. Additionally, the adhoc disallowance of Rs.1,00,000 for traveling and conveyance expenses was upheld due to lack of verifiable evidence and potential personal nature of the expenses. The order was pronounced on 26/07/2022.

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Issues:
1. Disallowance of interest on TDS payments.
2. Addition of traveling and conveyance expenses.

Issue 1: Disallowance of interest on TDS payments:
The appeal was filed against the disallowance of an addition of Rs.9,70,248 on account of interest on TDS payments. The AO disallowed the expenses as the assessee agreed that interest on TDS was not allowable under the Income Tax Act, 1961. The ITAT examined the provisions of the Act and judicial pronouncements. Section 201(1A) mandates payment of simple interest for delay in TDS remittance. The question was whether interest on late TDS payment could be claimed as expenditure. The Act allows deductions for interest paid on capital borrowed under Section 36(1)(iii). The ITAT analyzed the definition of interest, emphasizing the necessity of a loan for claiming deduction under Section 36(1)(iii). It concluded that interest on late TDS payment did not qualify as a business expenditure under Section 37(1) and was not compensatory in nature. Various court decisions were cited to support this conclusion, including the case of M/s. New Modern Bazaar Departmental Store Pvt. Ltd. The ITAT upheld the disallowance of interest on delayed TDS payment, confirming the AO's decision.

Issue 2: Addition of traveling and conveyance expenses:
The AO made an adhoc disallowance of Rs.1,00,000 for traveling and conveyance expenses, citing unverifiable vouchers and potential personal elements in the expenses. The appellant did not provide evidence to counter the AO's findings during the appellate proceedings. The AO's disallowance was considered reasonable, given the circumstances. The ITAT confirmed the disallowance of Rs.1,00,000, as the expenses were incurred in cash, not fully verifiable, and likely to have a personal nature. Therefore, the ground of appeal regarding this addition was dismissed.

In conclusion, the ITAT upheld both the disallowance of interest on TDS payments and the addition of traveling and conveyance expenses. The appeal of the assessee was dismissed, and the order was pronounced on 26/07/2022.

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