https://www.taxtmi.com/caselaws?id=77116 For deduction under section 37(1), the substance of an impost prevails over contractual labels: interest automatically charged for delayed sales tax payment is compensatory, not penal, and is deductible as business expenditure. A liability for royalty-related interest becomes deductible when it is finally determined and crystallised in the relevant accounting year, even if the dispute arose earlier. Interest on interest for belated royalty payment was treated as compound interest arising from delay, not a penal levy, and was allowable when the liability crystallised under the mercantile system. The governing test is whether the outgoing is compensatory in substance and whether the liability has crystallised in the relevant year. en-us Wed, 07 Oct 2009 00:00:00 +0530 Fri, 01 Feb 2013 16:54:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=77116 For deduction under section 37(1), the substance of an impost prevails over contractual labels: interest automatically charged for delayed sales tax payment is compensatory, not penal, and is deductible as business expenditure. A liability for royalty-related interest becomes deductible when it is finally determined and crystallised in the relevant accounting year, even if the dispute arose earlier. Interest on interest for belated royalty payment was treated as compound interest arising from delay, not a penal levy, and was allowable when the liability crystallised under the mercantile system. The governing test is whether the outgoing is compensatory in substance and whether the liability has crystallised in the relevant year. Case-Laws Income Tax Wed, 07 Oct 2009 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=77116