2023 (3) TMI 1153 - AT - Income Tax

Disallowance on account of interest payment on TDS deposited to the Income Tax Department - AO had proposed the impugned disallowance u/s 43B which allows deduction of statutory dues in the year of actual payment irrespective of the year in which the liability was incurred - As submitted by the assessee that the said payment of interest is evidenced by Bank Challan and the DRP directed the Ld. AO to allow the assessee s claim provided evidence of payment is produced before the Ld. AO - HELD THAT - Impugned disallowance for the reason assigned now is also not sustainable. Identical issue arose for consideration before Mumbai Bench of the Tribunal in M/s. M L Reality 2021 (9) TMI 877 - ITAT MUMBAI and the Tribunal in M/S. M.L. REALTY VERSUS ACIT 22 (2) , MUMBAI 2021 (9) TMI 877 - ITAT MUMBAI held that interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37(1) of the Act - Decided in favour of assessee. Disallowance paid towards arrears for contribution to provident fund - AO made the impugned disallowance for the sole reason that challans evidencing payment were not submitted - HELD THAT - After hearing all and finding that the assessee has established that the payment was made for PF arrears and documents were brought on record, we hold that the impugned disallowance is not sustainable. It is, therefore, deleted. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves issues related to disallowance of interest paid on delayed TDS, disallowance of arrears for contribution to provident fund, and initiation of penalty proceedings.

Disallowance of interest paid on delayed TDS:
The assessee challenged the disallowance of Rs. 94,662 as interest paid on delayed TDS, contending that it was allowable as a business expenditure. The Assessing Officer (AO) disallowed the amount, asserting that it pertained to different assessment years and was penal in nature. The Appellate Tribunal referred to precedents and held that interest on late TDS payment is compensatory and deductible under section 37(1) of the Income Tax Act. Citing relevant case laws, the Tribunal allowed the appeal and deleted the disallowance.

Disallowance of arrears for contribution to provident fund:
The AO disallowed Rs. 26,465 paid towards arrears for provident fund contribution due to lack of submitted challans. The assessee clarified that the payment was made via demand draft and reflected in the bank statement. The Tribunal found the payment substantiated and overturned the disallowance, ruling in favor of the assessee.

Initiation of penalty proceedings:
The AO initiated penalty proceedings under section 271(1)(c) of the Income Tax Act. However, no detailed discussion or resolution regarding this issue was provided in the summarized judgment.

This summary provides a detailed overview of the judgment, highlighting the key issues, arguments, and decisions made by the Appellate Tribunal ITAT DELHI.