TMI Blog2019 (1) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has not been utilized. Tax and interest has been given specific meaning under the act and the provisions of Section 40(a)(ii) refers only to any rate or tax levied without including therein the expression interest. Therefore, the stand of AO in disallowing the same u/s 40(a)(ii), in our opinion, was not justified. The payment of income tax is personal liability for the assessee and consequential interest paid thereupon for delay is part and parcel of the aforesaid payment only and retain the same color & character. This being the case, the deduction thereof u/s 37(1) could not be allowed to the assessee since it was personal expenditure in nature and the same could not be said to have been expanded wholly and exclusively for the purpose of assessee’s business since payment of taxes or interest could, by no stretch of imagination, be said to be the assessee’s business. For the same reason, the deduction thereof could not be allowed to assessee u/s 36(1)(iii) also which envisages amount of interest paid in respect of capital borrowed for the purposes of business or profession, which is not the case here. We are of the opinion that the aforesaid interest paid by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10/08/2018 . Accordingly, the appeal has come up for fresh hearing before the bench. 1.2 Aggrieved by the order of Ld. Commissioner of Income Tax (Appeals)-7, Mumbai, [CIT(A)], Appeal No. CIT(A)-7/Addl.CIT-3(3)/IT- 137/11-12 dated 07/05/2012, the assessee is under appeal before us with following effective Grounds of Appeal: - 1. The Order u/s 250 dated 7th May, 2012, passed by the Commissioner of Income Tax (Appeals)-7, Mumbai, is bad in law, contrary to the facts of the case and evidence on record, to the extent of Ground No.2. 2. The learned CIT (A) erred in upholding the disallowance to the extent of ₹ 1,83,05,381 being interest charged u/s 234B; u/s 234C and 234D, being compensatory in nature for use of government dues, as business expenditure u/s 37 of the Income Tax Act, 1961. Ground Number-2 is a revised ground filed by the assessee on 26/09/2018. 2.1 Briefly stated, the assessee being resident corporate entity engaged in the business of civil engineering architectural consultancy was assessed for impugned AY in scrutiny assessment u/s 143(3) on 30/11/2011 by Ld. Additional Commissioner of Income Tax, Range 3(3), Mumbai, [AO] wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod to mercantile method of accounting which resulted into higher tax outgo for the assessee and consequently, huge interest was paid u/s 234B-C-D during impugned AY. Our attention is drawn to the fact that the levy of interest was mandatory and automatic as per amendment brought in to statute w.e.f. 01/04/1989. The nature of this interest, as per several judicial pronouncements, was compensatory in nature and not penal in nature. Our attention has further been drawn to the fact that, upon further appeal for AYs 2004-05 to 2006-07, Ld. CIT(A) reversed the stand of revenue which was upheld by the Tribunal on 09/09/2011 and not further appeal/ reference against the same has been filed by the revenue and therefore, the matter attained finality in assessee s favor for those years. Resultantly, the additional tax payment including impugned interest paid by assessee was refunded during AY 2010-11 wherein the aforesaid amount of interest was offered for taxation. Therefore, it was submitted non-allowance of the same in the impugned AY would result into double taxation of the same amount, which was not justified. Per Contra , Ld. Departmental Representative submitted that interest was par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 2(28A) means interest payable in any manner in respect of moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilized. Therefore, tax and interest has been given specific meaning under the act and the provisions of Section 40(a)(ii) refers only to any rate or tax levied without including therein the expression interest. Therefore, the stand of Ld. AO in disallowing the same u/s 40(a)(ii), in our opinion, was not justified. 4.3 However, at the same time, it is also settled position that the payment of income tax is personal liability for the assessee and consequential interest paid thereupon for delay is part and parcel of the aforesaid payment only and retain the same color character. This being the case, the deduction thereof u/s 37(1) could not be allowed to the assessee since it was personal expenditure in nature and the same could not be said to have been expanded wholly and exclusively for the purpose of assessee s business since payment of taxes or interest cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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