https://www.taxtmi.com/caselaws?id=775103 ITAT Pune allowed the assessee's appeal regarding disallowance of penal interest paid to Janata Sahakari Bank for overdrawn cash credit facility. The AO had disallowed the expense considering it penal in nature. The tribunal held that under section 2(28A), "interest" includes any charge in respect of moneys borrowed or credit facility, encompassing penal interest. The assessee satisfied all conditions under section 36(1)(iii): money was borrowed for business purposes and interest was paid. The tribunal distinguished penal interest from prohibited payments, noting it was compensatory for breach of contractual obligation, not an offense under law. The payment was business-related and allowable under section 37(1). The assessment order was modified to allow the penal interest claim. en-us Thu, 17 Jul 2025 00:00:00 +0530 Sat, 19 Jul 2025 08:25:39 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=775103 ITAT Pune allowed the assessee's appeal regarding disallowance of penal interest paid to Janata Sahakari Bank for overdrawn cash credit facility. The AO had disallowed the expense considering it penal in nature. The tribunal held that under section 2(28A), "interest" includes any charge in respect of moneys borrowed or credit facility, encompassing penal interest. The assessee satisfied all conditions under section 36(1)(iii): money was borrowed for business purposes and interest was paid. The tribunal distinguished penal interest from prohibited payments, noting it was compensatory for breach of contractual obligation, not an offense under law. The payment was business-related and allowable under section 37(1). The assessment order was modified to allow the penal interest claim. Case-Laws Income Tax Thu, 17 Jul 2025 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=775103