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2019 (4) TMI 1580 - AT - Income TaxAdhoc disallowance of 10% of various expenses - HELD THAT:- We find that the expenses have been disallowed purely on an adhoc basis and even the CIT(A) has returned a finding that the AO has no material to make the subject disallowance. In absence of any finding that the expenses are bogus or not incurred for the purposes of the assessee’s business, the adhoc disallowance so made is directed to be deleted. In the result, the ground of appeal is allowed. Addition u/s 41(1) - HELD THAT:- As on last day of the financial year i.e, 31.03.2012 relevant to impugned assessment year, the amount of ₹ 69,270 stood credited in the account of Shekhawati Courier & Cargo. The act of square up of the said account with the trade debtor happened in subsequent financial year 2014-15 relevant to assessment year 2015-16. In absence of any finding that as on the close of the financial year, there is any benefit by way of remission or cessation of its freight liability, the amount cannot be brought to tax u/s 41(1) in the year under consideration. The Revenue is however free to take action as per law in the year the account was squared up. In the result, the ground of appeal is allowed. Disallowance of interest paid on service tax u/s 40(a)(ii) - assessee has paid interest on service tax - HELD THAT:- On a plain reading of the above provisions, it provides that any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. What it therefore provides is the rate or tax levied on the profits/gains of any business or profession. The interest on service tax is not a tax levied on the profits/gains of any business or profession. Thus, the very foundation of disallowance by invoking the provisions of section 40(a)(ii) is not satisfied in the instant case. Further, the decision relied upon by the ld CIT(A) is distinguishable as the said decision deals with case of interest on late deposit of TDS which was disallowed by the AO u/s 37(1) of the Act. Even where the provisions of section 37(1) are considered as implied invoked by the ld CIT(A) in the instant case, it is a settled position that the interest on account of delayed deposit of service tax is compensatory in nature and not in the nature of penalty and was, therefore, duly allowable under section 37(1) of the Act. The decision of the Coordinate Bench in case of Remfry & Sagar Consultants [2012 (9) TMI 190 - ITAT DELHI] which has laid down a similar proposition thus supports the case of the assessee. In the result, the ground of appeal is allowed.
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