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TMI Blog2018 (6) TMI 1730X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd [ 1998 (3) TMI 2 - SUPREME COURT ] We also find that the Hon'ble Supreme Court in the case of Lachmandas Mathura [ 1997 (12) TMI 16 - SUPREME COURT ] has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1). We find that in that case also, the issue involved was regarding allowability of interest on belated payment of service tax and TDS whereas in the present case, the issue in dispute is regarding interest payment on bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable. 5. Learned CIT(A) ought to have held that the levy of interest under sections 234B and 234D of the Act was bad in law and further ought to have directed the AO to cancel the same. 6. The Appellant craves leave to add to, amend, alter, vary and/ or withdraw any or all of these grounds of appeal. For these and other grounds that may be adduced at the time of hearing, the impugned order of the learned AO may be set aside in the interests of justice. 3. The ld. AR of assessee placed reliance on the Tribunal order rendered in the case of DCIT Vs. Narayani Ispat Pvt. Ltd. in ITA No. 2127/Kol/2014 dated 30.08.2017. He submitted a copy of this Tribunal order and it was submitted that in this case also, the issue involved was regarding disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent of estimated tax. The Assessing Officer levied interest under section 215 as well as under section 139. The assessee claimed that since taxes which were payable were delayed, the assessee's financial resources increased which were available for business purposes. Hence, the interest which was paid to the Government was interest on capital that would be borrowed by the assessee otherwise. Hence, the amounts should be allowed as deduction. The revenue did not allow such deduction. The High Court affirmed the view. On appeal to the Supreme Court : HELD When interest is paid for committing a default in respect of a statutory liability to pay advance tax, the amount paid and the expenditure incurred in that connection is in no way c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. In the instant case the default relates to the delay in the payment of advance tax and consequently interest was charged on the delayed payment of advance tax. In the above judgment the Hon'ble Apex Court held that as Income Tax paid by the assessee is not allowable deduction and therefore interest emanating from the delayed payment of income tax (advance tax) is also not allowable deduction. However the facts of the instant case before us are distinguishable as in the case before us the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus 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 Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X
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