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2014 (4) TMI 829 - HC - Income TaxAllowability of deduction u/s 37(1) of the Act - Amount of service tax included with interest – Held that:- The Tribunal rightly was of the view that the liability has been crystallized in the year under consideration – revenue had not brought on record any material that the service tax including interest had been recovered from the parties for which it had rendered service - The expenses were incidental and arising out of the business of the assessee - The interest payment is compensatory in nature - The expenses have direct nexus with the business operation. Relying upon Commissioner of Income Tax v. Luxmi Devi Sugar Mills P. Limited [1990 (9) TMI 8 - SUPREME Court] - the amount was expended by the assessee during the course of business, wholly and exclusively for the purpose of business - If the assessee had taken proper steps and charged service tax to the service recipients and deposited with the Government, there was no question of assessee expending such sum - It is only because the assessee failed to do so, that he had to expend the said amount, though it was not his primary liability - this cannot be stated to be a penalty for infraction of law - payment of interest is compensatory in nature and would not partake the character of penalty – Decided against Revenue.
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