TaxTMI 
TaxTMI 
2022 (4) TMI 906
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....t-company bonafide claim of allowing deduction of interest on late payment of TDS from Total Income. " 2. The relevant facts relevant to above addition are that during the assessment proceedings, the assessee vide letter dated 10/11/2017 made a fresh submission claiming that the assessee had paid interest of Rs. 1,61,33,389/- on late payment of TDS, which has been added back in the computation of income. Assessee claimed that interest paid is compensatory in nature and interest paid on late payment of TDS should be allowed as a deduction. The Assessing Officer considered the submissions of the assessee and observed that the interest is not allowable as deduction since interest paid under section 201(1A) or under section 206C(7) is nothing ....
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....nd wherein allowability of such expenditure has been upheld by the Hon'ble Court. He submitted that the Ld.CIT(A) relied upon the decision of Alloys Corporation Ltd vs CIT (supra) and other decisions which held that interest paid on late payment of taxable income of the assessee under section 215 which are basically relating to remittance of advance payment of tax. Therefore, the case relied by the Ld.CIT(A) is not applicable to the facts of the present case. Further, he submitted that the Hon'ble Bombay High Court in Arthur Anderson & Co. vs ACIT (2010) 324 ITR 240 (Bom), relying on the decision of the Hon'ble Supreme Court in Harshad Shantilal Mehta vs Custodian (1998) 231 ITR 871 (SC) held that interest u/s 220(2) is not disallowable. Th....
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....mittance of TDS. Therefore, the issue involved is whether the interest paid by the assessee to the government can be termed as compensatory or penal in nature. In our considered view, the assessee has deducted the tax on behalf of the third party and failed to remit the same within the due date and the interest charged on such amount is only compensatory in nature. Here we notice that the co-ordinate bench of this Tribunal has already held the same view in the case of STUP Consultants Pvt Ltd vs Addl.CIT (supra) by observing as under:- "7. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, AO has disallowed the interest expenses incurred by the assessee on account of ....
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....ore, be considered as an expenditure 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 ....
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....iew the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 TTR 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 29-2-1996. 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 revenue....