2021 (7) TMI 686 - AT - Income Tax

Disallowance of expenses on account of interest on late payment of service tax - CIT(A) deleted the disallowance holding that the interest on late payment of service tax is compensatory in nature - HELD THAT - CIT(A) deleted the disallowance holding that the interest on late payment of service tax is compensatory in nature. While doing so, he relied on the decision of the coordinate Bench of the Tribunal in the case of Messee Dusseldorf India (P) Ltd. 2009 (12) TMI 1034 - ITAT, DELHI . We do not find any infirmity in the order of the CIT(A) on this issue. We find, the coordinate Benches of the Tribunal are consistently holding that interest paid for late deposit of the service tax is a permissible deduction. Also see DEEPALI DESIGN EXHIBITS (P) LTD. 2019 (4) TMI 1017 - ITAT DELHI wherein as held service tax is permissible deduction the interest paid for late deposit of the same is also a permissible deduction and should be allowed in the same manner. - Decided against revenue Delayed employees contribution towards Provident Fund - addition u/s 2(24)(x) and section 36(1)(va) - CIT-A deleted the addition - HELD THAT - Delayed payments of employee s contribution to Provident Fund/ESIC is allowable if it is deposited before the return is filed u/s 139(1). In view of the legal position on the issue and the order of the Hon'ble ITAT, Delhi in the appellant s own case 2017 (1) TMI 1598 - ITAT DELHI the company is eligible for deduction made by the AO by invoking provisions of Section 36(1)(va) read with 2(24)(x) and 43B of the Act. The AO is, therefore, directed to delete the addition. Also see HC own case 2017 (9) TMI 1688 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of interest on late payment of service tax
2. Disallowance of payments towards Provident Fund and other funds

Issue 1: Disallowance of interest on late payment of service tax
The Revenue appealed against the deletion of an addition of ?54,31,041 made by the AO concerning interest on late payment of service tax by the assessee. The AO disallowed the amount, considering it not an allowable expenditure. However, the CIT(A) deleted the disallowance, citing that the interest was compensatory in nature, supported by a Tribunal decision. The Tribunal upheld the CIT(A)'s decision, emphasizing that interest paid for late service tax deposit is a permissible deduction, as consistently held by various Tribunal benches. The Tribunal also referred to a specific case where a similar disallowance was dismissed, further supporting the allowance of the deduction. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order.

Issue 2: Disallowance of payments towards Provident Fund and other funds
The AO added ?8,90,53,240 to the total income of the assessee due to non-compliance with provisions related to payments towards Provident Fund and other funds. The CIT(A) deleted this addition, noting that the payments were made before the due date of filing the return, aligning with legal precedents. The Tribunal supported the CIT(A)'s decision, referencing a previous case where a similar disallowance was dismissed by the High Court. The Tribunal emphasized that the decision of the jurisdictional High Court in the assessee's case for the previous assessment year was upheld, indicating no infirmity in the CIT(A)'s order. Therefore, the Tribunal upheld the deletion of the disallowance, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal in both issues, affirming the CIT(A)'s decisions regarding the disallowance of interest on late payment of service tax and payments towards Provident Fund and other funds.