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2021 (4) TMI 395 - AT - Income TaxDeduction of interest on late deposit of TDS under Section 37(1) - DR submitted that interest on late deposit of TDS is neither an expenditure wholly and exclusively incurred for the purposes of business and further it is a payment, which is in form of tax it is not an allowable expenditure - even otherwise there is no evidence that it is merely compensatory in nature, thus hit by proviso to section 37 (1) and interest on late payment of TDS has rightly been disallowed - HELD THAT:- The above issue has already been considered in CIT Vs. Chennai Properties & Investment Ltd. [1998 (4) TMI 89 - MADRAS HIGH COURT] wherein it has been held that interest under Section 201(1A) of the Act paid by the assessee does not assume the character of business expenditure and also cannot be regarded as compensatory payment. The above decision of the Hon’ble Madras High Court has also been dealt with exclusively by the various benches of the ITAT , specifically in Velankani Information Systems Ltd. [2018 (10) TMI 68 - ITAT BANGALORE] wherein considering various decisions of the Tribunal had followed the decision of the Hon’ble Madras High Court in CIT Vs. Chennai Properties & Investment Ltd. [1998 (4) TMI 89 - MADRAS HIGH COURT] No merit in the appeal of the assessee and hold that interest payment on late payment of tax at source is not eligible business expenditure for deduction and it is not compensatory in nature. None of the decision cited by the assessee in statement of facts supports the view of the assessee that above expenditure is allowable u/s 37 (1) of the act. Even assuming meanwhile denying, that above interest expenditure is compensatory in nature, it should be allowed as allowable expenditure. The conditions of the allowability of expenditure is laid down u/s 37 (1) of the income tax act which speaks that any expenditure which is not a capital expenditure or personal expenses of the assessee which is laid out or expended wholly and exclusively for the purpose of the business shall be allowed in computing the income chargeable Under the head profits and gains of business or profession. Payment of interest on late payment of TDS cannot be considered as an expenditure led out or expended wholly and exclusively for the purpose of the business because late payment of TDS cannot be considered as part of the business of the assessee. Thus we hold that payment of interest on late deposit of tax deduction at source by the assessee leviable u/s 201 (1A) of the act is neither an expenditure only and exclusively incurred for the purpose of the business and therefore same is not allowable as deduction u/s 37 (1) - Decided against assessee.
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