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TMI Blog2021 (4) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed it and Ld CIT (A) confirmed disallowance. 3. The brief facts show that assessee is a Pvt. Ltd. company engaged in the business of trading of groceries. It filed its return of income declaring income of Rs. 84,68,150/-. The ld. Assessing Officer on scrutiny found that assessee has debited to profit and loss account a sum of Rs. 32,793/- being interest under Section 201(1A) of the Act for late deposit of tax deduction at source. The above information was found from the tax audit report furnished by the assessee. IT was claimed by assessee as allowable expenditure u/s 37 (1) of the act. The ld. AO on examination noted that any expenditure incurred by an assessee for any purpose, which is an offence or prohibited by law, shall not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her it is a payment, which is in form of tax it is not an allowable expenditure. He further submitted that even otherwise there is no evidence that it is merely compensatory in nature. He submitted that it is hit by proviso to section 37 (1) of the act. He, therefore, submitted that the above interest on late payment of TDS has rightly been disallowed. 7. We have carefully considered the rival contentions. The above issue has already been considered by Hon'ble Madras High Court in CIT Vs. Chennai Properties & Investment Ltd. (1999) 239 ITR 435 (Mad.) wherein it has been held that interest under Section 201(1A) of the Act paid by the assessee does not assume the character of business expenditure and also cannot be regarded as compensatory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that the interest paid by the assessee was merely compensatory in character besides relying on the case of Makalakshmi Sugar Mills Co. also relied on the decision of the apex court in the cases of Prakash Cotton Mills Pvt Ltd. v. CIT [1993] 201 ITR 684; Malwa Vanaspati and Chemical Co. v. CIT [1997] 225 ITR 383 and CIT v. Ahmedabad Cotton Manufacturing Co. Ltd. [1994] 205 ITR 163. In all these cases, the court was concerned with an indirect tax payable by the assessee in the course of its business and admissible as business expenditure. Further liability for interest which had been incurred by the assessee therein was regarded as compensatory in nature and allowable as business expenditure. 16. The ratio of those cases is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der or did not have an occasion to consider the decision of the Hon'ble Madras High Court in the case of Chennai Properties and Investment Ltd. (supra). In these circumstances, we follow the decision of the Hon'ble Madras High Court & uphold the order of the CIT(A) insofar as it relates to disallowance of interest on delayed remittance of tax deducted at source u/s. 201(1A) of the Act." 8. In view of this, we do not find any merit in the appeal of the assessee and hold that interest payment on late payment of tax at source is not eligible business expenditure for deduction and it is not compensatory in nature. 9. Now we come to the various decisions cited by the assessee in the statement of facts laid down before us. The first de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is laid down u/s 37 (1) of the income tax act which speaks that any expenditure which is not a capital expenditure or personal expenses of the assessee which is laid out or expended wholly and exclusively for the purpose of the business shall be allowed in computing the income chargeable Under the head profits and gains of business or profession. Payment of interest on late payment of TDS cannot be considered as an expenditure led out or expended wholly and exclusively for the purpose of the business because late payment of TDS cannot be considered as part of the business of the assessee. 10. In view of the above facts we hold that payment of interest on late deposit of tax deduction at source by the assessee leviable u/s 201 (1A) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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