9911796707
TMI Blog2021 (7) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... actors. The case was selected for scrutiny and during the course of assessment proceeding, it was noticed that the assessee had debited an amount of Rs. 1,78,707/- on account of interest on delayed deposits on tax deducted at source (TDS). The assessee was asked to substantiate its claim of allowability of this amount. It was the assessee submission before the Assessing Officer that the interest had been paid in-compliance with the provisions of Income Tax Act, 1961 (hereinafter called 'the Act) and that such interest was compensatory in nature and was not penal in nature and was, therefore, an allowable deduction. However, the Assessing Officer did not accept the contention of the assessee and added the amount of Rs. 1,78,707/- to the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deduction from the income of the assessee. The Ld. CIT-DR also placed reliance on the judgment of the Hon'ble Madras High Court in the case of CIT vs. Chennai Properties Ltd. reported in 239 ITR 435 (Madras) and the case of Ferro Alloys Corporation vs. CIT reported in [1992] 196 ITR 406 (Bombay). The Ld. CIT-DR emphasized that the default in payment of statutory liabilities always has penal consequences and not compensatory consequences and, therefore, the appeal of the assessee deserved to be dismissed. 5.0 We have heard the rival submissions and have also perused the material on record. It is seen that ITAT Kolkata Bench in the case of DCIT vs. Narayani Ispat Pvt. Ltd. (supra) has held that interest paid on late deposit of TDS is compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Madras High Court in the case of Chennai Properties Investments Ltd. (supra) held that interest paid for delay in depositing tax deducted at source is in the nature of tax and the same cannot be allowed as deduction. While following the judgment of the Hon'ble Madras High Court in the case of Chennai Properties Investments (supra), the Bangalore Bench of ITAT also distinguished the order of the Kolkata Bench in the case of DCIT vs. Narayani Ispat Pvt. Ltd. in the following words: "Though the decision of the Tribunal is later in point of time, judicial discipline demands that the decision of the Hon'ble Madras High Court is to be followed. It is also worthwhile to mention that the Kolkata Bench of Tribunal in the case of Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents Ltd. (supra) as this was the only judgment of the Hon'ble High Court on the issue. 5.3 Thus, from the above matrix on the development of law on the issue, it emerges that interest is payable as consequence of failure to pay tax and the expenditure incurred for the purpose of payment of interest does not relate to the business of the assessee. Therefore, it is apparent that the payment of interest has nothing to do with the business of the assessee and, accordingly, payment of interest cannot be allowed as deduction under the provisions of the Act. While coming to this conclusion, we are guided by the ratio laid by the Hon'ble Madras High Court in the case of CIT vs. Chennai Properties and Investments Ltd. (supra) wherein the Hon'ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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