Tribunal Orders Reassessment of Interest on Late TDS and Pooja Expenses; Overturns Demurrage Disallowance as Compensatory.

The Tribunal allowed the appeal for statistical purposes, directing the AO to re-examine the claims regarding interest on late TDS deposits and Pooja expenses. The disallowance of demurrage charges was overturned, recognizing them as compensatory rather than penal. The decision was delivered in open court on 26.09.2019.

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Issues Involved:
1. Disallowance of interest paid on late deposit of TDS.
2. Disallowance of demurrage charges.
3. Disallowance of Pooja expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Interest Paid on Late Deposit of TDS:

The assessee contested the disallowance of Rs. 75,449/- as interest paid on late deposit of TDS. The Assessing Officer disallowed this amount under section 37 of the IT Act, considering it as penal in nature. The CIT(A) upheld this decision. The assessee argued that the delay in TDS payment is not linked to income-tax and cited various tribunal decisions supporting their claim. The Tribunal found merit in the assessee’s argument that the lower authorities did not consider these decisions. Therefore, the matter was restored to the Assessing Officer to give the assessee another opportunity to substantiate the claim. The ground was allowed for statistical purposes.

2. Disallowance of Demurrage Charges:

The assessee challenged the disallowance of Rs. 37,654/- as demurrage charges for not completing a project on time. The Assessing Officer disallowed this amount, considering it as penalty charges without evidence of actual expenses related to corresponding earnings. The CIT(A) upheld this decision. The assessee argued that these charges were compensatory, not penal, and referred to a job description for NIELIT, Gangtok, which included a penalty clause for delayed completion. The Tribunal agreed with the assessee, noting that the charges were compensatory and not for statutory violations. The Tribunal cited the Pune Bench decision in Shanti Commodities, which allowed similar expenses. Consequently, the Tribunal set aside the CIT(A)’s order and allowed the ground.

3. Disallowance of Pooja Expenses:

The assessee disputed the disallowance of Rs. 69,741/- for Pooja expenses. The Assessing Officer disallowed this amount, stating it was not exclusively for business purposes. The CIT(A) upheld this decision, noting that the Pooja was not akin to the case in Dalmia Cement where it was held near the factory for workers. The assessee argued for commercial expediency and cited the Gujarat High Court’s decision in Commercial Ahmedabad Mills, which allowed similar expenses. The Tribunal found that while the fifth anniversary Pooja expenses could be allowed, day-to-day Pooja expenses could not. The Tribunal restored the issue to the Assessing Officer to allow bifurcation and decide accordingly. This ground was allowed for statistical purposes.

Conclusion:

The appeal was allowed for statistical purposes with directions to the Assessing Officer to re-examine the claims for interest on late deposit of TDS and Pooja expenses, while the disallowance of demurrage charges was set aside. The decision was pronounced in open court on 26.09.2019.

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