TaxTMI 
TaxTMI 
2018 (6) TMI 1730
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.... CIT (A) erred in confirming the disallowance of interest payment ofRs. 10,45,601 on belated TDS payment without properly appreciating the law and the facts in proper perspective. 2. The learned CIT(A) ought to have appreciated that it is the case of the appellant inter-alia that interest on late payment of TDS is compensatoryand not penal in nature; that TDS is not a liability in the hands of the deductor; that interest paid on account belated TDS payment is only to compensate the loss, if any; etc, and therefore, the same is allowable. 3. The AO further erred in making the disallowance of interest payment to unsecured creditor while the provisions of S.194A were not attracted. 4. Learned CIT(A) grossly erred in ....
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....judgment of Hon'ble Apex Court rendered in the case of Bharat Commerce Industries Ltd. Vs. CIT as reported in 230 ITR 733. The ld. DR of revenue supported the orders of authorities below. 4. We have considered the rival submissions and for the sake of ready reference, we reproduce para 7 of this Tribunal order rendered in the case of DCIT Vs. Narayani Ispat Pvt. Ltd. (supra). The same reads as under. "7. We have heard the rival contentions of both the parties and perused thematerial available on record. In the instant case, AO has disallowed the interestexpenses incurred by the assessee on account of late deposit of service tax and TDSafter having reliance on the judgment of Hon'ble Supreme Court in the case of BharatCommerc....
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....xpenditure for the purpose of earning any income or profits. Interest which is paid for delayed payment of advance tax on such income cannot be considered as expenditure wholly and exclusively for the purpose of business. Under the Act, the payment of such interest is inextricably connected with the assessee's tax liability. If income-tax itself is not permissible deduction under section 37, any interest payable for default committed by the assessee in discharging his statutory objection under the Act, which is calculated with reference to the tax on income, cannot be allowed as a deduction. Therefore, it was to be held that deduction of interest levied under sections 139 and 215 would not be allowable under section 37. ....
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....he said view the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.) The learned counsel appearing for the appellant-assessee states that the said judgment of the Full Bench has been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. v. CIT[1983] 144 ITR 732 (All.) (FB), wherein it has been held that interest on arrears of tax is compensatory in nature and not penal. This question has also been considered by this Court in Civil Appeal No. 830 of 1979 titled Saraya Sugar Mills (P.) Ltd. v. CIT decided on 29-21996. In that view of the matter, the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the....