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TMI Blog2013 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal as penalty. Merely because the agreement referred to such interest as a penal interest, any such payment would not partake the character of penalty. It is not even the case of the Revenue that the sum expended by the assessee was for payment of penalty. It was simplicitor liability of interest on delayed payment of installments - Decided against Revenue. - Tax Appeal No. 327 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to Section 37(1) of the Act?" 2. Short issue is whether the Revenue is right in contending that the sum of Rs. 51.14 lakhs (rounded off) paid by the respondent assessee by way of interest on delayed payment of instalments can be treated to be in the nature of penalty and therefore not leviable by way of deduction under Section 37(1) of the Act. Admitted facts are that the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal reversed the decision of CIT (Appeals) making following observations:- "16. We have considered rival submissions. We find that a perusal of the Resolution No.JNV-1099-2023-A of the Govt. of Gujarat (supra) makes it clear that the Govt. of Gujarat has prescribed rates of interest on loans for the public sector undertaking, which is clearly in the nature of "penal interest" and not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the CIT(A) that such late payment is against the public policy and amount paid by the same could not be allowed as deductible expenses under Section 37(1A) in view of Explanation to section 37(1), is not sustainable in law. The interest charged at the rate of 2% per month for delayed payment of instalment by the assessee-company could not be equated with payment made against the public policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty. Merely because the agreement referred to such interest as a penal interest, any such payment would not partake the character of penalty. It is not even the case of the Revenue that the sum expended by the assessee was for payment of penalty. It was simplicitor liability of interest on delayed paymentof instalments. 5. In the result, no question of law arises. Tax Appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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