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2021 (7) TMI 5 - AT - Income TaxDisallowance being interest paid on delayed deposit of TDS - Allowable business expenditure or not? - whether it is compensatory in nature and is, therefore, allowable as deduction? - HELD THAT:- Interest is payable as consequence of failure to pay tax and the expenditure incurred for the purpose of payment of interest does not relate to the business of the assessee. Therefore, it is apparent that the payment of interest has nothing to do with the business of the assessee and, accordingly, payment of interest cannot be allowed as deduction under the provisions of the Act. While coming to this conclusion, we are guided by the ratio laid in the case of CIT vs. Chennai Properties and Investments Ltd. [1998 (4) TMI 89 - MADRAS HIGH COURT] wherein as clarified that Income Tax is not allowable as business expenditure and the amount deducted as tax is not an item of expenditure. Hon’ble Madras High Court also referred to the judgment of Bharat Commerce Industries Ltd. v[1998 (3) TMI 2 - SUPREME COURT] wherein has rejected the arguments advanced by the assessee that retention of money payable to the State as tax or Income Tax would augment the capital of the assessee and the expenditure incurred towards the normal interest paid for the period of such retention would assume character of business expenditure and hold that an assessee could not possibly claim that it was borrowing from the State, the amounts payable to it as Income Tax, and utilizing the same as capital in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure. Decided against the assessee.
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