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TMI Blog2020 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or interest expenses on delayed payment are compensatory in nature and this is allowable expenditure in business u/s 37. Therefore, we direct the AO to allow the claim of payment of interest made by the assessee on account of late payment of Sales Tax, on account of late payment of Excise and Service Tax and on account of late payment of EPF. Addition on account of claim of loss by theft - HELD THAT:- As per facts of the present case, since the assessee was hopeful of getting the recovery of amount but it was only when the assessee during the year under consideration had come to conclusion that recovery is impossible or chance of recovery became remote, therefore, the assessee had rightly made his claim during the year under consideration. Therefore, in view of the decision of CIT vs Durga Jewellers 1987 (11) TMI 35 - MADHYA PRADESH HIGH COURT] we allow the claim of the assessee and direct the AO to delete the addition made on account of claim of loss of theft. - ITA No. 1115/JP/2019 - - - Dated:- 23-1-2020 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri S.L. Poddar, Advocate For the Revenue : Shri K.C. Gupta, JCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in confirming the addition of ₹ 3,94,946/- as per the provisions of section 2(24)(x) read with section 36(1)(va) of the Income Tax Act, 1961 on account of delay in payment of ESI and PF made by the learned AO. The assesssee has debited following expenses on account of interest expenses in P L A/c during the year under consideration: - S.No. Particulars Amount 1 Interest on delay payment to parties 1144231.00 2 Interest on late payment of excise service tax, EPF 188449.00 3 Interest on LC (Bank Limit) for export 57385.19 4 Interest on late payment of sales tax payment 122729.00 5 Interest on late payment of TDS 83768.00 Total 1596562.19 During the assessment proceedings the learned AO has mentioned in the assessment order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest payment was not in penal in nature. It is only compensatory in nature to the government for delayed payment of liabilities. It is paid in the name of interest and not in the name of penalty. Therefore it cannot be disallowed. During the assessment proceedings the assessee has submitted as under: - It is submitted that according to the provisions of section 37(1) of the Act, any expenditure incurred wholly and exclusively for the purposes of business is allowable as deduction, provided the same was not incurred for the purpose of any offence or which is prohibited by law. The payment made by taxpayer on account of interest on late deposit of any statutory liability was compensatory in nature. The same was not in the nature of penalty for said default. Reliance in this regard is placed on the decision of Karnataka High Court in the case of CIT v Oriental Insurance Co. Ltd: 315 ITR 102 , wherein, it has been held that interest paid under section 201(1A) of the Act for late deposit of TDS is compensatory to government treasury and not penal in nature. It is further submitted that the interest partakes the character of principal in respect of which the same is paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the High Court in Triveni Engg. Works Ltd. v. CIT (1983) 144 ITR 732 (All.) (FB), wherein it has been held that interest on arrears of tax is compensatory in nature and not penal. This question has also been considered by this Court in Civil Appeal No. 830 of 1979 titled Saraya Sugar Mills (P) Ltd. v. CIT decided on 29-2-1996. In that view of the matter, the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the revenue. The same view was further approved by the ITAT Kolkata in the case of DCIT Vs Narayani Ispat (P) Ltd. Appeal Number : ITA No. 2127/Kol/2014 Date of Judgement/Order : 30/08/2014 wherein it has been held that Interest was paid for delayed payment of service tax TDS. The interest for the delay in making the payment of service tax TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand . In view of the above judgments, there remains no doubt that the interest expense on the delayed payment disallowed by the learned AO for ₹ 3,94,946/- deserves to be allowed. Copy of interest paid on delayed payment account is placed on pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late payment of TDS u/s 201 (1A) is concerned, useful reference can be drawn to the decision of Hon ble Bombay High Court in case of Ferro Alloys Corporation Ltd vs. CIT (1992) 196 ITR 406 (Bom) where interest payment u/s 201(1A) for failure to deduct or pay tax deducted at source was held not deductible. A Similar view has been taken by the Madras High Court in case of CIT vs. Chennai Properties Investment Ltd., (1999) 239 ITR 435 (Mad) wherein it was held as under (Head notes): The liability for deduction of tax arises by reason of the provisions of the Act. Under section 201, the consequence of failure to comply with the same renders that person liable to be deemed as an assessee in default with all the consequences attached thereto. The liability to pay interest on the amount not deducted or deducted, but not paid is directly related to the failure to deduct or remit the amount. The amount required to be deducted is the amount payable as income-tax. The interest paid for the period of delay takes colour from the nature of the principal amount required to be paid but not paid within time. The principal amount here would be the income-tax and the interest payable for delayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully following the decision of this Coordinate Bench in assessee's own case (supra), we sustain the addition of ₹ 83,768/- on account of late payment of TDS. However, on account of interest paid by the assessee on account of late payments of Sales Tax, Excise Service Tax and EPF are concerned, in this respect, we rely upon the decision of ITAT Coordinate Bench in the case of CIT vs Western India State Motors (1988) 174 ITR 116 (Raj) wherein it has been said that interest payment of delayed payment of statutory liabilities is allowable as business expenditure. Therefore, the amount of interest paid in respect of late deposit of statutory/Govt. liabilities also partake the character of an expenses which is allowable as expenditure u/s 37(1) of the I.T. Act, 1961. We are also fortified by the decision of Hon'ble Supreme Court in the case of Lachmandas Mathura vs CIT , 254 ITR 799 wherein it was held that when any statutory dues are paid delayed and interest is paid for delayed payment then it is compensatory in nature and allowable expenditure for business u/s 37 of the I.T. Act, 1961. In view of the above decision, there remains no doubt that delay in making payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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