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TMI Blog2019 (11) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... its claim of allowability of interest paid on late deposit of TDS. The ground raised by the assessee is accordingly allowed for statistical purposes. Demurrage charges deducted by the customers for not completing the project in time - HELD THAT:- CIT(A) upheld the action of the AO. It is the submission of the ld. counsel for the assessee that the same is not for violation or infraction of any statutory provisions and the same is compensatory in nature for not completing the project in time. I find merit in the above argument of the ld. counsel. A perusal of the paper book page 83 shows that as per the terms and conditions for undertaking the work awarded by National Institute of Electronics and Information Technology, Gangtok, the assessee is liable to pay penalty @ 0.10% of the quoted rate per day for non-completion of the project within six weeks from the date of receiving the work order. The same, in my opinion, is not for violation of any statutory law, but, will amount to compensatory in nature. Pune bench of the Tribunal in the case of Shanti Commodities [ 2014 (12) TMI 344 - ITAT PUNE ] has held that penalties paid for violation of rules laid by Forward Market Commission be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per section 37 of the IT Act, no reply was filed by the assessee on this issue to explain as to why the same is an allowable expenditure. The Assessing Officer, therefore, made addition of ₹ 75,449/- to the total income of the assessee. In appeal, the ld.CIT(A) confirmed the action of the Assessing Officer on the ground that interest on late payment of deposit of TDS is not an allowable expense u/s 37(1) of the Act as it was in the nature of penal interest. 4. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal. 5. The ld. counsel for the assessee, referring to various decisions filed in the paper book, submitted that 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. vs. CIT, 230 ITR 733 cannot be applied. He submitted that the Calcutta Bench of the Tribunal in the case of M/s Sai Products Pvt. Ltd. vs. DCIT, vide ITA No.1887/Kol/2016, order dated 6th April, 2018, has held that disallowance made by the Assessing Officer on account of interest on late deposit of TDS which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Ground No.2 by the assessee reads as under:- The action of the ld.CIT(A) in confirming the action of the ld. Assessing Officer in disallowing the sum of ₹ 37,654/- being the amount of demurrage charges deducted by the customers for not completing the project in time is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 9. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings noted that the assessee company has debited ₹ 37,654/- on account of penalty charges. On being asked by him, the assessee submitted that this amount is in the nature of demurrage charges for not completing the project in time. The Assessing Officer did not accept the above contention of the assessee in absence of evidence to show that the actual expenses related to the corresponding earning has increased and it is a loss to the company. He accordingly made addition of ₹ 37,654/- to the total income. Before CIT(A) the assessee reiterated the same submissions as made before the Assessing Officer and submitted that the said amount was in the nature of demurrage charges for not completing the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer. It is the submission of the ld. counsel for the assessee that the same is not for violation or infraction of any statutory provisions and the same is compensatory in nature for not completing the project in time. I find merit in the above argument of the ld. counsel. A perusal of the paper book page 83 shows that as per the terms and conditions for undertaking the work awarded by National Institute of Electronics and Information Technology, Gangtok, the assessee is liable to pay penalty @ 0.10% of the quoted rate per day for non-completion of the project within six weeks from the date of receiving the work order. The same, in my opinion, is not for violation of any statutory law, but, will amount to compensatory in nature. I find the Pune bench of the Tribunal in the case of Shanti Commodities (supra) has held that penalties paid for violation of rules laid by Forward Market Commission being in the nature of civil liability similar to compounding fees and not fee for any serious violation of provisions of law was to be allowed u/s 37(1) of the Act. In view of the above discussion, I am of the considered opinion that the ld.CIT(A) is not justified in susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court has allowed the claim of the assessee on account of Pooja expenses. He accordingly submitted that the order of the CIT(A) should be set aside and the ground raised by the assessee should be allowed. 20. The ld. DR, on the other hand, heavily relied on the orders of the Assessing Officer and the CIT(A). 21. I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I find the Assessing Officer in the instant case, disallowed an amount of ₹ 69,741/- claimed by the assessee on account of Pooja expenses on the ground that it is not a welfare measure and in no way connected with the business of the assessee and, therefore, cannot be said to be wholly and exclusively for the business of the assessee. I find the ld.CIT(A) upheld the action of the Assessing Officer. It is the submission of the ld. counsel that such expenses bring harmony between the management and the employees and are for commercial expediency. Therefore, it should be allowed as a deduction. It is also his submission that in view of the decision of Hon'ble Gujarat High Court in the case of Commercial Ahmedabad Mills Co. Ltd. (supra) wherein it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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