2022 (1) TMI 350

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....erein the reasons for belated filing of this appeal. On perusal of the reasons stated for belated filing of the appeal, we noticed that no latches can be attributed to the assessee and there is sufficient cause in filing this appeal belatedly. Accordingly, we condone the delay in filing this appeal and proceed to dispose of this appeal on merits. 3. The assessee has raised eight grounds. All the grounds relate to two issues, namely, (i) CIT erred in sustaining the disallowance of Rs. 2,77,635 u/s 36(1)(iii) of the I.T.Act, and (ii) CIT(A) erred in confirming the A.O.'s action in disallowing a sum of Rs. 13,08,004 being interest for delayed deposit of service tax. We shall adjudicate the issues as under. Disallowance of Rs. 2,77,635 u/s 36....

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....l on record. The CIT(A) deleted the addition u/s 14A of the I.T.Act for the reason that the assessee has not earned any exempt income for the relevant assessment year. However, he sustained the addition u/s 36(1)(iii) of the I.T.Act for the reason that the assessee has not challenged the alternate addition u/s 36(1)(iii) before the first appellate authority. We find that the assessee has raised ground before the CIT(A) that investments are made in subsidiary and are out of commercial expediency. The assessee has also placed judicial pronouncements in support of its claim. Therefore, the CIT(A) is not justified in sustaining the addition of Rs. 2,77,635 u/s 36(1)(iii) of the I.T.Act without disposing of the assessee's grounds on merits. Henc....

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.... an intention of evasion of service tax. As can be discerned from the above, separate sections govern the penal and interest consequences on delay in payment of service tax. This being the case, interest on delay in payment of service tax cannot be held to be penal in nature. The payment of interest is automatic when there is a delay in payment of taxes. Unlike penalty provisions, interest on delayed payment is not the discretion of the Officer. It has to be paid by the assessee and there is no option of waiver of the same by the Tax Officer. Therefore, the payment of interest is compensatory in nature and not in the nature of penalty or fine, disallowable u/s 37 of the I.T.Act. The Hon'ble Apex Court in the case of Mahalakshmi Sugar Mills ....

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....0- itat-2012 (HYD) (iv) CIT v. Luxmi Devi Sugar Mills (P.) Ltd. (1991) (v) C.C.E., Salem v. Subramania Siva Co-op Sugar Mills Ltd. 2014 (35) S.T.R 500 (Mad.) (vi) Commissioner of Trade Tax, Lucknow v. Kanhai Ram Thekedar 2005 (185) E.L.T. 3 (SC). 5.5 The Hon'ble Gujarat High Court in the case of CIT v. Kaypee Mechanical India (P.) Ltd. reported in (2014) 45 taxmann.com 363 (Guj) was considering a case of deductibility of interest on service tax. The Hon'ble Gujarat High Court held that the interest payment is an expenditure deductible u/s 37 of the I.T.Act. The relevant finding of the Hon'ble Gujarat High Court, reads as follows:- "The amount was expended by the assessee during the course of business, wholly and exclusively for the....