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2018 (8) TMI 1259 - ITAT MUMBAIDisallowance u/s 37(1) towards VAT paid as alleged penalty for violation of law - penalty levied by the Sales Tax Department for violation of law - whether this interest payable u/s 30(2) and 30(4) of MVAT Act, 2002 is compensatory or penal in nature. - Held that:- after going through the relevant provisions of the MVAT Act, 2002 and other material on record, we have no hesitation to hold that interest paid by the assessee u/s 30(4) of the MVAT Act, 2002 is penal in nature as it has its germane to infraction of law by the dealer while filing original return of VAT and the interest paid u/s 30(4) of MVAT Act, 2002 cannot be allowed as deduction while computing income under the head ‘Profits and Gains of Business or Profession‘ keeping in view Explanation 1 to Section 37(1) of the 1961 Act. The AO is directed to bifurcate the payments as between interest paid by the assessee u/s 30(2) and 30(4) of the MVAT Act, 2002 respectively and allow interest paid u/s 30(2) of MVAT Act, 2002 as deduction from income computed under the head ‘Profits and Gains of Business or Profession‘ , while interest paid by the assessee u/s 30(4) of MVAT Act, 2002 shall be disallowed while computing income chargeable to tax under the head ‘Profits and Gains of Business or Profession‘. - Decided partly in favor of revenue. Disallowance u/s 14A r.w.r. 8D - assessee did not earned exempt income during the year - Held that:- if no exempt income is earned by the assessee during the previous year relevant to the impugned assessment year , no disallowance u/s 14A of the 1961 Act is called for - Decided against the revenue.
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