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TMI Blog2022 (7) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable as deduction u/s 37(1) of the Act. Disallowance made by the AO is hereby confirmed. The ground of appeal is dismissed. Travelling Conveyance expenses and depreciation on vehicles insurance expenses - The expenses claimed consist of small/petty cash amounts and self made vouchers are not fully verifiable and the personal element of expenses by use of vehicles by directors and staff members cannot be ruled out - HELD THAT:- AO has made adhoc disallowance of Rs.1,00,000/- by stating that vouchers of expenses are not fully verifiable and the personal elements of expenses by use of vehicles by Directors and staff members cannot be ruled out. In the appellate proceedings the assessee has not produced any evidences to rebut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961. The assessee itself also agreed that interest on TDS is not allowable expenses, therefore, the AO disallowed the expenses of interest on TDS of Rs.9,70,248/-. Interest on TDS is not an allowable expenditure. In this case the assessee itself agreed for the assessment before the AO and this fact is not disputed by the ld. AR in the appellate proceeding. It is undisputed law that income tax inputs interest, penalty also and the same is not allowable as per provisions of Section 40(a)(ii) of the Act. Notwithstanding the contentions of the assessee before the revenue authorities, we have examined the issue of allowability as per the provisions of Income Tax Act and in the background of the various judicial pronouncements. 5. Sec. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real borrowing or real lending. It must be construed in its natural and ordinary meaning and implies a real borrowing and real lending. It requires the existence of a borrower and a lender and accordingly there must be a real borrowing. 9. Unlike section 2(28A), clause (iii) of section 36(1) does not use the term debt incurred . Hence, section 2(28A) defines interest in a wider sense whereas Section 36(1)(iii) has used it in a restrictive manner. Therefore, it may be concluded that there must be a loan on which interest is paid for claiming allowance u/s 36(1)(iii) of the Act. Existence of lender and borrower are must in case of a loan transaction. Hence, it can be safely concluded that non-payment of taxes does not amount to the bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Mathura Vs. CIT reported in 254 ITR 799 are as follows: The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench s decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.) The learned counsel appearing for the appellant-assessee states that the said judgment of the Full Bench has been reversed by the larger Bench 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid on the same anyway would have been allowed as deduction u/s 36. The Revenue submitted that interest on late deposit of TDS is neither an expenditure wholly and exclusively incurred for the purpose of business and further it is a payment, which is in the form of tax so it is not an allowable expenditure. The ITAT dismissed the appeal of the assessee. 13. The Hon ble Madras High Court in CIT Vs. Chennai Properties Investment Ltd. (1999) 239 ITR 435 (Mad.) has held that interest under section 201(1A) paid by the assessee does not assume the character of business expenditure and also cannot be regarded as compensatory payment. 14. This decision of Hon ble Madras High Court has also been followed by various benches of ITAT, specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith an indirect tax payable by the assessee in the course of its business and admissible as business expenditure. 3. The ratio of those cases is not applicable here. Income-tax is not allowable as business expenditure. The amount of tax deducted is not an item of expenditure. 4. We therefore, follow the decision of Hon ble Madras High Court and uphold the order of CIT(A) in so far as it relates to disallowance of interest on delayed payment of TDS u/s 201(1A) of the Act. 15. Further, the Co-ordinate Bench of ITAT Bangalore in the case of Jindal Aluminimum Limited ITA No. 31/Bang/2019 having similar facts where interest on TDS is held as ineligible business expenditure. 16. Hence, we have no hesitation to hold that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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