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TMI Blog2024 (11) TMI 1295X X X X Extracts X X X X X X X X Extracts X X X X ..... gible units. Same is the view expressed in case of Techno Tarp and Polymers Private Limited [ 2015 (12) TMI 909 - BOMBAY HIGH COURT] Appeal of the assessee is allowed. Disallowance on delayed payment of tax deducted at source u/s 37 - HELD THAT:- We find that this amount of expenditure is incurred by the assessee being interest on late payment of tax deduction at source. We find that interest on late payment of tax deduction at source by the assessee is not shown before the lower authorities that how it has been incurred wholly and exclusively for the purposes of the business of the assessee. In fact, such interest is in infraction of the law of the provisions of the income tax act when tax deducted at source required to be deposited after collecting from third parties to the credit of Central Government is deposited late. It is penal in nature. In the case of CIT v. Chennai Properties Investment Ltd. [ 1998 (4) TMI 89 - MADRAS HIGH COURT] declared that the assessee's payment of interest u/s 201(1A) does not qualify as a business expense and cannot be seen as a compensatory payment. The payment of interest on late deposits of TDS assessed under Section 201(1A) is not an expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction. - SHRI PRASHANT MAHARISHI, AM AND SHRI RAJ KUMAR CHAUHAN, JM For the Assessee: Ms Chandni Shah/Hinal Shah Shri Amol Mahajan For the Revenue: Shri Ashok Kumar Ambastha, Sr. (DR) ORDER PER PRASHANT MAHARISHI, AM: 1. ITA No. 1656/M/2024 is filed by Media.Net Software Services India Private Limited for Assessment Year 2014 2015 against the appellate order passed by National Faceless Appeal Centre (NFAC), Delhi (the learned CIT A) on 20/2/2024 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3 of the income Tax Act, 1961 (the Act) dated 22/1/2016 passed by the Deputy Commissioner of Income Tax, Circle 10 (2) (2), Mumbai (the learned AO) was partly allowed. 2. Assessee is aggrieved with the appellate order has raised several grounds of appeal as under: 1. On the facts and in the circumstances of the case at in tow the Lit Commissioner of com Appeals or CIT(A) erred in confirming the additions made by the Ld Assessing Officer (AO) of INR 3,82,04,3944 to the returned income of the Appellant The Appellant humbly prays that the additions made by the LS CIT(A)/AD be deleted 2. On the facts and in the circumstances of the case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer is that if the brought forward business loss of Rs. 15,956,392/ is set of against the business income, no profit derived from the industrial undertaking was left eligible for deduction under section 10 AA of the act and therefore such deduction was disallowed. The assessee s claim that circular number 279 dated 16/7/2013 does not apply to the facts of the case. The tax audit report also shows that assessee has debited interest on late payment of tax deduction at source of Rs. 163,711/ and interest on delay in filing of companies return of Rs. 5063/ and penalty for renewal of custom license of Rs. 21,000/ aggregating to Rs. 189,774/ the learned assessing officer found that above expenditure is hit by explanation to section 37 (1) of the income tax act. Thus, same was disallowed. The AO further notice that in the computation of total income assessee has claimed set off of brought forward business loss of Rs. 44,963,298/ however as per the assessment records for earlier year the business loss available for carried forward and set off is only Rs. 15,956,392/ . Accordingly set off was reduced to that extent. The income of the assessee was computed at Rs. 68,829,880 against the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a paper book containing 70 precedents including the judicial precedents of honourable Bombay High Court and Honourable Supreme Court along with the coordinate benches. The learned authorized representative relied on the same. 6. The learned Departmental Representative vehemently supported the order of the learned lower authorities and decision cited therein. 7. We have carefully considered the rival contention and perused the orders of the learned lower authorities. 8. Ground number 1 of the appeal is general in nature, no arguments were advanced, therefore, same is dismissed. 9. Ground number 2 of the appeal is with respect to the deduction under section 10 AA of the act. In this case the issue that arises is that assessee has derived the profit of SEZ unit before depreciation of Rs. 1,32,05,014 and depreciation of that assessee unit was Rs. 4,171,237/ . Therefore, the profit and loss of the assessee unit eligible for deduction under section 10 A of the act was Rs. 9,033,777 as claimed by the assessee. However, the fact shows that assessee has a business loss of Rs. 44,963,298 as claimed by the assessee in the computation of income. The Assessing Officer has held that this busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the credit of Central Government is deposited late. It is penal in nature. 11. In the case of CIT v. Chennai Properties Investment Ltd. the Madras High Court declared that the assessee's payment of interest under Section 201(1A) does not qualify as a business expense and cannot be seen as a compensatory payment. This decision of Hon ble Madras High Court has also been followed by various benches of ITAT, specifically in Velankani Information Systems Limited v. DCIT as under: - Regarding the delay in remitting TDS under Section 201(1A) of the Act, we discover that the Honourable Madras High Court has come to the conclusion that interest under Section 201(1A) is also of the nature of tax and, despite the fact that it is not the assessee's tax liability, the same cannot be allowed as deduction. 12. The payment of interest on late deposits of TDS assessed under Section 201(1A) is not an expense solely and exclusively expended for business purposes; hence it is not deductible under Section 37(1) of the Act. Even if the deduction and remittance of TDS to the government are essential components of business operations, the assessee is nonetheless liable for this interest amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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