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2019 (10) TMI 836 - AT - Income TaxAddition u/s 41 - proof of remission or cessation of a ‘trading liability’ - HELD THAT:- In the case before us the CIT(A) had rightly observed that in the absence of any evidence to conclude that there was a final remission or cessation of a ‘trading liability’ or any part of it, therefore, the provisions of Sec.41(1) could not have been invoked by the A.O. As regards the adverse inferences drawn by the A.O in respect of the genuineness of the transactions under consideration, we are of the considered view, that as the respective amounts had not been ‘credited’ in the ‘books of account’ of the assessee during the year under consideration, therefore, for the said reason itself the provisions of Sec.68 were clearly ousted and no addition of the said amount could have been made in the hands of the assessee under the said statutory provision during the year under consideration. We thus not finding any infirmity in the order of the CIT(A), to the extent he had vacated the addition made by the A.O u/ss. 41(1)/68 of the Act, therefore, uphold the same Disallowance of the interest on service tax - deduction u/s 37(1) disallowed - HELD THAT:- CIT(A) did not find favour with the view taken by the A.O, and observed, that as the payment of interest was compensatory in nature, therefore, the same was rightly claimed as a deduction u/s 37 by the assessee. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the view taken by the A.O. We find that Sec.75 of the Finance Act, 1994, which envisages levy of interest on late service tax payment is compensatory in nature and cannot be characterised as a levy of penalty. Levy of penalty under the Service Tax Act is contemplated in Sec.76 of the Finance Act, 1994. Accordingly, as the payment of interest on late service tax payment by the assessee is found to be compensatory in nature, therefore, the same in our considered view could not have been held as not allowable as a deduction under Sec.37(1) of the Act. We thus finding no infirmity in the order of the CIT(A), who in our considered view had rightly vacated the disallowance of the interest on late service tax payment made by the A.O, uphold his order to the said extent.
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