2023 (8) TMI 868 - AT - Income Tax

Tribunal allows appeal for delay, but upholds disallowance of interest deduction under Income Tax Act

The Tribunal allowed the appeal for condonation of delay, permitting the case to be heard on merits. However, it upheld the disallowance of the deduction ... Interest paid u/s 201(1A) claimed as deduction while computing the profits and gains - HELD THAT:- The Bangalore Bench of the Tribunal in assessee’s own case [2022 (8) TMI 349 - ITAT BANGALORE] had categorically held after relying various judicial pronouncements that interest u/s 201(1A) of the I.T. Act cannot be claimed as a deduction. We hold that interest paid by the assessee u/s 201(1A) cannot be allowed as a deduction while computing the profits and gains of the assessee. A.O. had made an addition by stating that the said amount is the interest paid u/s 201(1A) claimed as deduction u/s 37 - According to the AR, the disallowance can be limited to the TDS - In this context, the learned AR had submitted that the assessee has filed a rectification application before the A.O. and the same is pending - The above contention of the learned AR needs to be examined by the A.O. For the limited purpose of examining the figures for disallowance, the issue is restored to the files of the A.O. The A.O. is directed to examine the correct figure of interest paid u/s 201(1A) of the I.T. Act that is claimed as a deduction. Appeal filed by the assessee is partly allowed for statistical purposes. Issues Involved: 1. Condonation of delay in filing the appeal.2. Deductibility of interest paid under Section 201(1A) of the Income Tax Act as a business expenditure under Section 37(1).Condonation of Delay:The appeal was filed with a delay of 138 days. The assessee submitted a petition for condonation of delay along with an affidavit explaining the reasons for the delay. The Tribunal found sufficient cause for the delay and condoned it, allowing the appeal to be heard on merits.Deductibility of Interest under Section 201(1A):The assessee claimed a deduction under Section 37 for interest paid under Section 201(1A) for the belated remittance of TDS. The Assessing Officer disallowed this deduction, adding the amount to the assessee's total income. The CIT(A) upheld this decision, relying on the judgment of the Hon'ble Madras High Court in CIT v. Chennai Properties & Investment Ltd. and the Delhi Bench of the Tribunal in New Modern Bazaar v. ITO.The Tribunal affirmed that interest paid under Section 201(1A) cannot be claimed as a deduction under Section 37. It cited the Bangalore Bench's decision in the assessee's own case for the assessment year 2017-2018 and other judicial pronouncements, including the Hon'ble Supreme Court's decision in Bharat Commerce and Industries Ltd. v. CIT, which held that such interest is not an expense incurred wholly or exclusively for business purposes.Examination of Correct Figures:The Tribunal noted a discrepancy in the figures related to the disallowed amount. The assessee claimed that only Rs. 11,32,835 was claimed as a deduction, not Rs. 93,54,851 as stated by the AO. The Tribunal directed the AO to verify the correct figure of interest paid under Section 201(1A) and take a decision in accordance with the law after providing a reasonable opportunity of hearing to the assessee.Conclusion:The appeal was partly allowed for statistical purposes, and the matter was remanded to the AO for the limited purpose of verifying the correct amount of interest claimed as a deduction.