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TaxTMI 
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TaxTMI 
2024 (11) TMI 275
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....rejudicial to the interest of the revenue. In the present case, Ld. AO has passed the reasoned assessment order after analyzing all details and therefore there was no error in the impugned assessment order so as to justify action u/s. 263 of the Act. Under the circumstances, the very assumption of power u/s. 263 of the Act is unjustified and bad in law and therefore, order u/s. 263 of the Act deserved to be quashed. 3. The subject order u/s. 263 passed by the Ld. PCIT is illegal and bad in law in absence of any finding of Ld. PCIT how the alleged error of AO has resulted in loss of revenue particularly when interest paid u/s. 201(1A)/206C(7) on late payment of TDS/TCS has rightly been claimed as an allowable expenditure u/s. 37 of the Act. 4. The Ld. PCIT has further erred in law and on facts in not appreciating that the view taken by the AO during the assessment proceedings is a possible view and hence the revisionary proceedings are illegal and bad in law. 5. The ld. PCIT has further erred in law in not coming to any concrete conclusion and without conducting any inquiry or investigating the issue, merely directed the AO to frame the assessment order afresh. Without there b....
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....s not linked to their income tax but rather constituted a liability incurred as an agent of the Government in relation to third-party payments. Therefore, the assessee submitted that the interest was deductible under Section 37, and not subject to disallowance under Section 40(a)(ii) of the Act. The assessee company submitted that during the original scrutiny assessment, all relevant details had been provided, and the AO had not raised any issues concerning the expenses claimed by the assessee. The assessee placed reliance on various judicial precedents in support of their position that the interest on late payment of TDS should not be disallowed. The Principal CIT was of the view that the AO had erred in not considering the Audit Report, which indicated the inadmissibility of the claimed interest. This oversight was deemed to have resulted in a loss of Revenue, thereby satisfying the conditions for revising the assessment under Section 263. As a result, the Principal Commissioner exercised the powers conferred under Section 263, setting aside the AO's order dated April 22, 2021. The AO was directed to re-evaluate the claim regarding the interest on late payment of TDS amountin....
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....d deposit of TDS is not an allowable expenditure. 7. We have heard the rival contentions and perused the material on record. We observe that in the case of Resolve Salvage & Fire India (P.) Ltd. v. DCIT 139taxmann.com196 (Mumbai - Trib.), the ITAT has held that interest paid on delayed payment of TDS under section 201(1A) would be compensatory in nature and thus, was to be allowed as deduction. While passing the order, ITAT made the following observations: 5. Considered the rival submissions and materials placed on record. We observe that assessee has paid interest on late payment of TDS. We observe from various decisions relied upon by both the parties and we observe that Ld.CIT(A) has relied upon the decision of Ferro Alloys Corpn. (supra) in which the Hon'ble High Court has not discussed anything on merit considering the fact that the case Bharat Commerce Industries Ltd. v. CIT [1985] 20 Taxman 302/153 ITR 275 was pending before Hon'ble Supreme Court and we observe that even in the case of Bharat Commerce Industries Ltd, the issue involved is relating to interest paid on late payment of advance-tax. Therefore, the issue involved in the present case is not relating to ....
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....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. In the above judgment, the claim of the assessee for interest expenses was denied as it defaulted to make the payment of advance tax as per the provisions of the Act. The advance tax is nothing but income tax only which the assessee has to pay on his income. In the instant case the default relates to the delay in the payment of advance tax and consequently interest was charged on the delayed payment of advance tax. In the above judgment the Hon'ble Apex Court held that as Income-tax paid by the assessee is not allowable deduction and therefore inte....
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....ent Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon'ble Apex Court in the case of Bharat Commerce Industries Ltd. v. CIT (1998) reported in 230 ITR 733 cannot be applied to the case on hand.' 6. Being consistent with the above decision of the co-ordinate bench, we hold that the interest paid on delayed payment of TDS u/s 201(1A) is an allowable deduction. We direct accordingly. Assessee succeeds in its appeal. 7. In the result, appeal filed by the assessee is allowed. 8. Therefore, in view of the above judicial precedent and other precedents cited by the Counsel for the assessee, we are of the considered view that the Assessing Officer has taken a legally plausible view, duly supported by judicial precedents. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), wherein it was held as under: "When an Income Tax Officer adopted one of the courses permissible in law and it has res....
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....every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. --------- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may....