TaxTMI 
TaxTMI 
2025 (12) TMI 649
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....together and are being disposed of by way of this consolidated order for the sake of convenience and brevity. Facts of the Case 2. The assessee, a company engaged in the business of construction and development of residential premises under different residential project names, filed its return of income under section 139(1) of the Act for the respective assessment years declaring income as per particulars tabulated below. The cases were selected for scrutiny and notices under section 143(2) were issued and duly served. The Assessing Officer, after examining the material placed on record, made various disallowances and additions under different heads, determining the assessed income for each year as set out below. The Assessing Office completed the assessment by passing order u/s 143(3) of the Act. The details of the assessment and the additions are tabulated below: Sr Particulars A.Y. 2013-14 A.Y. 2014- 15 1 Date of filing return u/s 139(1) 30.09.2013 30.11.2014 2 Returned Income in Rs. 13,49,70,010 1,85,84,840 3 Notice u/s 143(2) 04.09.2014 28.08.2015 4 Date of Order u/s 143(3) 28.03.2016 28.11.2016 5 Disallow....
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....ted by cheques etc. 5. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.6,90,620/- on adhoc out of site development expenses. 6. The Learned Commissioner of Income Tax (Appeals) erred in confirming addition of Rs.7,88,200/- out of soil filling expenses on adhoc basis on the premises that proper documentation were not available. 7. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 1,49,349/- u/s 68 of the Act. 8. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of 49,48,271/- out of cancelled booking. 9. The appellant company craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. In Assessee's Appeal ITA No. 478/Ahd/2023 1. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s 14A of Rs. 16,21,240/-. 2. The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance u/s 36(i)(iii) of Rs.5,95,000/- despite the fact that the advances were given for business purposes only. 3. The Learned Co....
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....ings the assessee has not submitted receipt of the political party. 5. In addition to the ground No.4, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,71,000/- made by the AO on account of disallowances of claim u/s 80GGB of the I.T. Act on the basis of fresh and additional evidences in the form of bank statements submitted by the assessee, dehorse provisions of Rule 46A of I.T. Rules and without calling remand report. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs.78,82,000/- made by the AO on account of site development expenses (soil filling expenses) to Rs. 7,88,200/- holding that the expenditure is not capital in nature but revenue in nature and observing that estimated 10% of total site expenses are not verifiable despite the fact that the land development expenses are capital in nature or should be included in the value of WIP and at the time of sale of property only such claim could be allowed to the assessee. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in....
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.... and in law, the Ld. CIT(A) erred in deleting the addition of Rs.18,29,853/-made by the AO on account of interest on delayed payment of service tax/VAT despite the facts that the interest on late deposit of service tax/VAT being penal in nature is not an allowable expense as per section 37 of the IT. Act. 13. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 14. It is, therefore, prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 15. The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made. 5. We shall now proceed to deal with each of the issues arising in these appeals, one by one, taking up the relevant grounds of both the assessee and the Revenue together wherever the subject matter is common. Issue 1 - Disallowance u/s 14A r.w. Rule 8D A.Y. 2013-14 6. The assessee company had claimed exempt income ....
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....or statutory liabilities and had no nexus with earning exempt income. The CIT(A) accepted this contention and directed that such interest should be excluded from the computation under Rule 8D(2)(ii). On re-computation, the interest disallowance under Rule 8D(2)(ii) stood reduced from Rs. 7,59,826/- to Rs. 6,08,541/-, while the disallowance under Rule 8D(2)(iii) of Rs. 1,73,278/- was confirmed. Accordingly, the total disallowance sustained was Rs. 7,81,819/-. 10. On the issue of adjustment to book profit under section 115JB, the CIT(A) followed the Special Bench decision in ACIT v. Vireet Investment (P.) Ltd. [165 ITD 27 (Del) (SB)] and held that disallowance computed under section 14A could not be added while computing book profit under section 115JB, since there is no specific provision in the Act permitting such an adjustment. The addition under section 115JB was therefore deleted by the CIT(A). A.Y. 2014-15 11. The assessee earned exempt income of Rs. 49,98,203/- as share of profit from partnership firms during the year and had claimed interest and finance cost of Rs. 2,78,49,714/- in the profit and loss account. The AO noted that the assessee had investments in the cap....
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....om 136 (SC) - Axis Bank Ltd. Vs. ACIT - [2024] 166 taxmann.com 348 (ITAT - Ahmedabad) 17. The AR also drew our attention to the relevant financial statements forming part of the paper book and furnished a summary of key figures as under: Particulars A.Y. 2013-14 (Rs.) A.Y. 2014-15 (Rs.) Investment in Shreenath Incorporated (Partnership firm) 61,50,284/- 1,74,01,754/- Own Funds: a. Share Capital 2,57,14,200/- 2,57,14,200/- b. Reserves & Surplus 16,94,95,635/- 18,19,68,995/- Total Own Funds (a + b) 19,52,09,835/- 20,76,83,195/- 18. It was thus urged that, in view of the availability of substantial own funds and the binding judicial precedents, the disallowance sustained by the CIT(A) under section 14A ought to be deleted in full. 19. With regard to the disallowance of administrative expenses under Rule 8D(2)(iii), the Bench specifically asked the learned AR whether the judicial precedents relied upon also cover such disallowance. In reply, the learned AR submitted that the ratio of the decisions of the Hon'ble Supreme Court, when applied in the present factual matrix where sufficient own ....
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.... also note that none of the judicial precedents relied upon by the assessee specifically address the issue of disallowance relatable to administrative expenses under Rule 8D(2)(iii). The ratio of such decisions primarily concerns the disallowance of interest expenditure under Rule 8D(2)(ii), particularly in the context of the assessee having sufficient own funds to cover the investments. Those pronouncements do not contain any categorical finding to the effect that administrative expenditure is outside the ambit of section 14A read with Rule 8D(2)(iii) in cases where exempt income is earned. 25. In the present case, the assessee has not made any suo-motu disallowance in respect of administrative expenditure incurred in relation to the earning of exempt income. The onus was on the assessee to demonstrate, with cogent evidence, that no part of its administrative set-up, including personnel, infrastructure, and other common resources, was deployed in the activity of making, holding, or managing investments that yielded exempt income. No such evidence has been brought on record. In the absence of any segregation or allocation of expenditure, it cannot be accepted that the investment....
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...., and (iv) Pawan Infrahome Pvt. Ltd. - Rs. 1,08,13,407/-. It was further observed that the assessee was simultaneously paying interest on borrowed funds, and no material was produced to establish that the said advances were given for the purposes of the assessee's business. Despite lapse of over three years from the date of advancing these sums, no explanation or evidence was furnished to substantiate the business expediency or commercial necessity of such advances. The Assessing Officer, therefore, computed proportionate interest at the rate of 12% on the interest-free advances, working out the disallowance at Rs. 26,65,085/- and added the same to the total income. 31. In appellate proceedings, the assessee submitted that the concerns to whom advances were made were engaged in real estate and construction- related activities, and the advances represented business transactions. However, in respect of Godiji Realty Pvt. Ltd. and Venugopal Infrastructure, no documentation was produced to evidence the nature of the transactions or the business compulsion for advancing funds. Regarding Pawan Infraspace Pvt. Ltd. and Pawan Infrahome Pvt. Ltd., it was claimed that the advances wer....
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....se of hearing, for both the years the learned AR of the assessee submitted that the assessee had sufficient own funds to make the impugned advances and, therefore, no disallowance of interest under section 36(1)(iii) was warranted. In respect of two non-related parties, namely, (i) Godiji Realty Pvt. Ltd. - Rs. 2,45,00,000/-, and (ii) Venugopal Infrastructure - Rs. 35,00,000/-, it was explained that the amount advanced to Godiji Realty Pvt. Ltd. had been subsequently returned, whereas in the case of Venugopal Infrastructure, the deal was cancelled as the assessee could not advance further funds, and the amount already given was not returned by the party. The AR submitted that both transactions represented business decisions taken in the normal course of business. As regards the advances to (iii) Pawan Infraspace Pvt. Ltd. - Rs. 85,55,000/-, and (iv) Pawan Infrahome Pvt. Ltd. - Rs. 1,08,13,407/-, it was stated that these concerns were subsidiary or associate concerns of the assessee and, therefore, no interest was charged on the amounts advanced. In support of the contention, reliance was placed on the decision of the Co-ordinate Bench in Assistant Commissioner of Income-tax v. Jewe....
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....allowable under section 36(1)(iii) if the assessee is able to demonstrate that the funds have been advanced to a sister concern or a third party as a measure of commercial expediency. The expression "commercial expediency" has been judicially interpreted to encompass such advances as are motivated by considerations of business advantage, even if no direct commercial return is shown in the same year. 40. In the present case, apart from a bald assertion that the advances were made in the normal course of business, the assessee has not furnished any documentary evidence such as agreements, memoranda of understanding, board resolutions, correspondence, confirmations from the recipients, or any contemporaneous record to substantiate the claim that these sums were advanced wholly and exclusively for the purposes of business. The mere production of ledger accounts, without any narrative or supporting documentation, is insufficient to establish the nexus required under section 36(1)(iii). 41. In the case of Jewel Consumer Care (P.) Ltd. [2023] 157 taxmann.com 643 (Ahmedabad - Trib.), the Co-ordinate Bench deleted a disallowance under section 36(1)(iii) because (i) the interest-free l....
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....ructure, the amount was not returned by the recipient on account of the assessee's inability to advance further funds, is merely an ex post facto justification and does not establish that the initial advance was made for business purposes. Similarly, no evidence has been brought to show that the advance to Smt. Induben R. Patel had any nexus with the assessee's real estate or construction activities or that it was otherwise dictated by commercial expediency. 45. In the absence of any credible or contemporaneous evidence to substantiate the business purpose of these advances and applying the ratio laid down in Abhishek Industries Ltd. (supra) and Punjab Stainless Steel Industries (supra), we are unable to accept the assessee's contention. The burden of proof under section 36(1)(iii) squarely rests upon the assessee, and in the facts of the present case, that burden has not been discharged. Accordingly, we find no infirmity in the orders of the lower authorities in sustaining the disallowance of proportionate interest in respect of the above parties for the relevant years. 46. In view of the foregoing discussion, we partly allow the assessee's grounds for both t....
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.... earlier year in respect of similar transactions. In the case of Shri Shailesh S. Parikh, the AO observed from the ledger that Rs. 15,00,000/- was the opening balance as on 01.04.2012, out of which Rs. 3,00,000/- was repaid on 19.11.2012, leaving a closing balance of Rs. 12,00,000/-. In respect of M/s Satyam Associates, the assessee relied upon a notarized Banakhat dated 01.06.2010 showing a token payment of Rs. 50,00,000/-. The AO also recorded contradictions in the assessee's stand, at one stage claiming that Satyam Associates had executed registered deeds with the assessee and at another stage claiming that it was a tripartite arrangement with M/s Rajni Builders Pvt. Ltd. as confirming party. The AO held that interest-bearing funds had been diverted for non-business purposes and computed proportionate interest @ 12% on the amounts advanced, working out the disallowance at Rs. 1,66,981/- in the case of Shri Shailesh S. Parikh and Rs. 6,60,000/- in the case of M/s Satyam Associates, aggregating to Rs. 8,26,981/-, which was added to the total income. 50. In appellate proceedings, the assessee submitted that the advances were for business purposes in connection with purchase ....
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.... confirmed and the grounds of appeal were dismissed. 52. The learned DR, on the other hand, supported the order of lower authorities. 53. We have carefully considered the rival submissions and gone through the orders of the lower authorities as well as the material placed on record. The undisputed facts for both the assessment years are that the assessee has advanced sums of Rs. 12,00,000/- to Shri Shailesh S. Parikh and Rs. 55,00,000/- to M/s Satyam Associates, which have been treated by the assessee as advances for land. The Assessing Officer has disallowed proportionate interest thereon, amounting to Rs. 8,26,981/- for A.Y. 2013-14 and Rs. 8,04,000/- for A.Y. 2014-15, holding that the assessee failed to establish the business nexus of such advances. The learned CIT(A) has confirmed the disallowances essentially on the ground that the supporting agreements and other evidences were either defective or absent, and no proof of payment or business necessity was furnished. 54. We find that neither the Assessing Officer nor the learned CIT(A) has examined an important aspect, namely, the subsequent fate of these advances. There is no finding in the impugned orders as to whethe....
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....rted for non- business purposes, the disallowance may be sustained in accordance with law. 57. Accordingly, the related ground of assessee in case of both the years are allowed for statistical purposes. Issue - 4 Cost of land / purchase of land Rs. 15,16,966/- A.Y. 2013-14. 58. During the assessment proceedings, vide notice under section 142(1) dated 07.03.2016, the assessee was called upon to produce details with evidence regarding the cost of land of Rs. 2,30,09,656/-. In response, the assessee produced only a ledger copy of the cost of land without supporting evidence. Accordingly, vide order sheet entry, the assessee was asked to show cause why the cost of land taken at Rs. 2,30,09,956/- should not be disallowed and added to the total income in the absence of proof. In response, the assessee produced evidence in respect of land at Vincenza-51 amounting to Rs. 2,14,92,990/-. Consequently, the AO required the assessee, vide order sheet entry dated 15.03.2016, to explain the balance amount of Rs. 15,16,966/- for which no evidence was produced. As neither the assessee nor its Authorised Representative could produce any satisfactory details or evidence explaining the credit....
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....e recorded cost of land as per the books. Out of the total amount Rs. 5,00,000/- had been paid in the immediately preceding year, while the balance was paid during the relevant year under appeal. The AR explained this position by referring to the ledger account extracts placed at pages 66-70 of the paper book, which, according to him, clearly recorded the payments along with the names of the payees. It was further submitted that these amounts had been paid by account-payee cheques, and the relevant entries had been traced and tallied with the assessee's bank statements to establish their genuineness. The AR argued that the nature of the payment was compensatory and intended solely to resolve the dispute, thereby enabling the assessee to perfect title over the land and proceed with its intended use for the purposes of its business. 62. On the other hand, the learned DR relied upon the order of the Assessing Officer, pointing out that despite being specifically asked during the assessment proceedings, the assessee had failed to produce any contemporaneous agreement, settlement deed, or other documentary evidence to substantiate the claim that the payments were made pursuant to....
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....e 5 - Disallowance of Site development expenses / soil filling expenses 68. For A.Y. 2013-14, the assessee had claimed total site development expenses of Rs. 1,47,88,197/- in its profit and loss account. On verification of the details, the Assessing Officer noticed that out of this amount, expenditure of Rs. 78,82,000/- pertained to capital/WIP in nature, as discussed separately. Out of the balance amount of Rs. 69,06,197/-, it was observed that a substantial portion of the expenses were paid in cash and supported only by self-made internal vouchers, which were not capable of independent verification. The Assessing Officer held that the genuineness of such expenses could not be established, and further, there existed a possibility of a personal or non-business element being embedded in such claims. Accordingly, on an ad hoc basis, 10% of the balance site development expenses amounting to Rs. 6,90,620/- was disallowed and added to the total income. In addition, with respect to soil filling expenses of Rs. 78,82,000/-, the Assessing Officer made a separate disallowance treating the same as capital in nature. In first appeal, the learned CIT(A) restricted this disallowance to Rs. 7....
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.... filling expenses has been made purely on an ad hoc basis, without pointing out any specific defect in the supporting records except for the fact that some of the payments were made in cash. It was contended that the assessee had furnished complete project-wise details of total expenditure of Rs. 1,47,88,197/- for the relevant assessment year, along with ledger accounts, bills, and invoices, which included the claimed site development expenses of Rs. 78,82,000/-. The AR argued that the AO had neither disputed the genuineness of the projects nor examined the evidences in detail before resorting to a percentage-based disallowance. 71. Reliance was placed on the decision of the Co-ordinate Bench in Baba Farid Public Welfare Society v. ITO (Exemptions) [2022] 145 taxmann.com 233 (Amritsar - Trib.) wherein it was held that where the Assessing Officer had made an ad hoc disallowance of 10% of total expenses without specifying any particular lacuna in the evidences, such disallowance was not sustainable in law and deserved to be deleted. The learned DR, on the other hand, relied on the reasoning given by the AO, emphasising that the assessee had made substantial cash payments and that ....
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....ontention that the expenditure of Rs. 78,82,000/- in A.Y. 2013-14 is capital in nature, we observe that these costs pertain to site development and soil filling, which are integral to the assessee's real estate project. Given the nature of business, all such costs are embedded in the project's work-in-progress until completion and revenue recognition. Since the assessee has recognised work-in-progress, the matching principle ensures that these costs are allocated against future revenue, leaving no scope for their separate treatment as capital expenditure. Moreover, no independent capital asset apart from the project has come into existence from such expenditure. 75. Accordingly, the ad hoc disallowances sustained by the CIT(A) in both A.Y. 2013-14 and A.Y. 2014-15 are deleted. The Revenue's ground on capitalisation is rejected, with a direction that the expenditure be treated as revenue expenditure accordance with accepted accounting and taxation principles. Thus, the assessee's grounds for both years are allowed and the Revenue's grounds are dismissed. Issue - 6 - Deduction of Rs.1,71,000/-under section 80GGB for the A.Y. 2013-14 76. Ground No. 4 of th....
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....fficer had disallowed the claim holding that the motor cars were registered in the names of the directors of the assessee company, that no evidence was furnished to establish their use for the purposes of the assessee's business, and therefore the conditions of section 32 of the Act, were not fulfilled. In Ground No. 8, the Revenue has further assailed the impugned order on the ground that the learned CIT(A) deleted the addition by relying upon additional evidence in the form of documents and explanations, which were not filed before the Assessing Officer, without affording an opportunity to the Assessing Officer for examination in terms of Rule 46A of the Income-tax Rules, 1962. 79. We note that before the learned CIT(A), the assessee submitted that although the vehicles in question were registered in the individual names of the company's directors, they were purchased for and used in the business of the company. The purchase consideration for the vehicles was financed through loans obtained from banks in the name of the assessee-company, which were duly recorded in its books of account. The vehicles themselves were reflected as assets in the company's balance sheet....
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....ose of depreciation, the term "owner" includes a person who has dominion over the asset, bears the risks and rewards of ownership, and uses it for the purposes of business, even if legal title or registration stands in another's name. 83. The learned CIT(A) also relied upon the decision of the Jurisdictional ITAT, Ahmedabad in ITO v. Bajaj Herbals P. Ltd. [2021] 130 taxmann.com 258, wherein it was held that depreciation is allowable on a car registered in the director's name if the funds for purchase are provided by the company, the asset is reflected in the company's balance sheet, and it is used for the company's business. Following the ratio of these judicial precedents, the learned CIT(A) found that the assessee had established beneficial ownership and business use of the vehicles. Necessary documents, including the bank statement showing instalment payments by the company, were adduced and perused. No contrary material was brought on record by the Revenue to rebut these findings. 84. In view of the above factual matrix and the binding precedents, we find no infirmity in the decision of the learned CIT(A) in directing deletion of the disallowance of Rs. 9,....
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....h proper primary evidence such as bank statements or proof of payment, and that the ledger accounts filed at the appellate stage could not be accepted at face value without independent verification. 89. We have considered the rival submissions, the relevant material placed in the paper book, the orders of the authorities below, and the ledger accounts produced before us. The addition of Rs. 1,49,349/- comprises two components Rs. 1,18,703/- in the name of Shivam Transport Co. and Rs. 30,646/- in the name of Sujal Advertisers Pvt. Ltd. 90. In case of Shivam Transport Co., it is the assessee's case that the liability of Rs. 1,18,703/- was written off in the subsequent year and duly offered to tax in F.Y. 2015-16 relevant to A.Y. 2016-17. The ledger account placed on record confirms that the amount was transferred to "Kasar (Discount)" account on 31.03.2016. The Revenue has not disputed this factual position nor brought any material to show that the amount was not so offered to tax. Once the sum has already been taxed in the subsequent year, sustaining the same in the impugned year would lead to double taxation, which is impermissible. We, therefore, direct deletion of this ....
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....e on account of interest paid of Rs. 92,603/-. 94. In appeal, the assessee reiterated that the impugned loan had been received in an earlier year (F.Y. 2010-11) and was reflected in the balance sheet as opening balance in the year under consideration. The assessee also stated that the said loan was repaid during the year under consideration. It was argued that provisions of section 68 apply only to credits found in the books during the relevant previous year and not to brought forward balances. The assessee further relied on the confirmations, bank statements, and income-tax returns of the creditor, and submitted that the interest payment had been made through banking channels after deduction of TDS, for which TDS returns had been filed. 95. The CIT(A) observed that the assessee had reflected an opening balance of unsecured loan from the said creditor at Rs. 11,68,953/- as on 01.04.2012. During the relevant previous year, a sum of Rs. 10,00,000/- was repaid by cheque, along with an interest payment of Rs. 92,603/- for the year. The assessee also claimed to have paid Rs. 2,00,000/- as part of the principal repayment. On verification of the bank statement and ledger, the CIT(A)....
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....d that the impugned sum does not represent any fresh unsecured loan during the year, and therefore the primary condition for addition under section 68 of the Act is not satisfied. The Ld. CIT(A), having co-terminous powers with that of the Assessing Officer, was justified in examining the evidence and recording a finding that the loan was old and repaid during the year. We, therefore, find no infirmity in the action of the Ld. CIT(A) in deleting the impugned addition. The Revenue's objection regarding violation of Rule 46A is without merit in the facts of the present case, as the evidence relied upon is part of statutory records (Form 3CD) and books of account, which form part of the assessment proceedings. Ground No. 9 of the Revenue's appeal is dismissed. Issue - 10 - Addition on account of amount payable towards Cancellation of Booking 101. The next common issue arising in the appeals of both the assessee and the Revenue for A.Ys. 2013-14 and 2014-15 relates to the taxability of advances received towards booking of units which were subsequently cancelled. The Assessing Officer made additions of Rs. 1,56,75,889/- for A.Y. 2013-14 and Rs. 1,29,77,163/- for A.Y. 2014-....
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.... The AO again held that the assessee had failed to substantiate the identity, creditworthiness, and genuineness of the parties from whom such advances had been received, and added the amount to the total income under section 68. 107. During appellate proceedings for A.Y. 2013-14, the assessee contended that the amount of Rs. 1,56,75,889/- included opening balances and amounts refunded during the year. It submitted charts (Annexure-8) evidencing that Rs. 1,18,48,271/- was received during the year and Rs. 12,91,892/- was repaid, leaving the net new receipts. It was further contended that Rs. 38,27,618/- represented the opening balance as on 01.04.2012, and Rs. 68,09,000/- was refunded in the subsequent year, supported by bank statements (Annexure-9). Therefore, the addition was claimed to be unsustainable. The CIT(A), after examining the AO's order, assessee's submissions, and supporting evidence, accepted that Rs. 38,27,618/- was the opening balance and Rs. 68,09,000/- was refunded in the subsequent year. These two amounts aggregating to Rs. 1,07,27,618/- were directed to be deleted from the addition. However, in respect of the remaining amount of Rs. 49,48,271/-, the ass....
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....he Assessing Officer on the evidence now relied upon by the assessee. It was contended that the aspect of repayment required factual verification at the assessment stage, which had not been done, and therefore, the matter may be restored to the file of the Assessing Officer for necessary examination. 112. We have carefully considered the rival submissions and perused the material available on record. Before us, the learned AR reiterated that the amounts in dispute had been repaid and produced certain ledger accounts and bank statements in support. The learned DR, on the other hand, contended that these repayments had not been subjected to verification by the Assessing Officer, and that the matter required reconciliation and confirmation from the concerned parties. On a perusal of the record, we find that the issue involves multiple components, including identification of creditors, tracing of repayments to specific liabilities, and reconciliation of opening and closing balances with the amounts received and repaid during the year. The verification of these aspects necessarily requires examination of the primary records and confirmations from the parties concerned, which can be e....
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....d that the amount of Rs. 5,59,511/- did not pertain to interest on VAT but represented interest on late payment of TDS, which had already been disallowed by the assessee in the computation of income, and hence its further disallowance would result in double taxation. It was further claimed that the amount of interest relatable to Service Tax was Rs. 12,28,844/- (comprising Rs. 12,28,984/- on service tax and Rs. 54,860/- on VAT), and not Rs. 12,70,342/- as considered by the Assessing Officer. The assessee argued that the interest on delayed payment of Service Tax and VAT was compensatory in nature, having the same character as the underlying statutory dues, and thus allowable as deduction under section 37(1) of the Act. Reliance was placed on various judicial precedents, including the decision of the Hon'ble Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT (123 ITR 429), and decisions of coordinate benches holding that such interest is allowable being compensatory in nature. 117. After considering the submissions and judicial precedents cited, the CIT(A) held that interest on late payment of Service Tax and VAT is compensatory in nature and, therefore, allowable as deducti....