Interest on TDS

[CA Rachit Agarwal]

Whether interest paid on delayed payment of TDS is deductible expenditure? Is there any case law.

Various opinion has come: 

1. As income tax is not deductible and TDS being income tax, hence interest on TDS also not deductible

2. As TDS is linked to the deductible expenditure, hence interest on TDS also deductible.

Request you to give a proper opinion.

[CAGOPALJI AGRAWAL]

Interest paid under any provisions of income tax is not allowable expenditures as held by various high courts as well as Supreme Court. See Bharat Commerce & Industries Limited Vs. CIT[1998] 230ITR733

AI Summary

Interest on tax deducted at source treated as non-deductible expenditure under precedent, not an allowable business deduction. Authoritative precedent treats interest payable under income tax provisions, including interest on delayed TDS remittance, as not an allowable expenditure. This position, adopted by higher courts and cited in the decision in Bharat Commerce & Industries Ltd. v. CIT, characterises such interest as a tax consequence rather than an expense deductible against income.