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2022 (8) TMI 349 - AT - Income TaxDisallowance of employees’ contribution to provident fund (PF) and employees state insurance (ESI) u/s. 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B - HELD THAT:- As in the case of Essae Teraoka Pvt. Ltd.[2014 (3) TMI 386 - KARNATAKA HIGH COURT] we hold that the employee’s contribution paid by the assessee before the due date of filing the return of income u/s.139(1) of the Act is allowable as a deduction and the addition is deleted. Disallowance of interest on TDS - AO held that expense towards interest on TDS which is penal in nature and not allowable u/s. 37(1) - HELD THAT:- The coordinate Bench of this Tribunal in Velankani Information Systems Ltd. [2018 (10) TMI 68 - ITAT BANGALORE] dealt with this issue and held that interest on delayed payment of TDS cannot be allowed as deduction. As it is clear that the basis why tax or interest is not allowed as deduction u/s.37(1) of the Act is on the reasoning that it cannot be regarded as an expense incurred wholly or exclusively for the purpose of Assessee’s business. Therefore the allowability of interest on taxes paid should not be looked out from the definition of tax as given in Sec.2(43) of the Act. The submissions made by the learned counsel for the Assessee are based on a misconception that the definition of interest u/s.2(43) of the Act is relevant and that the disallowance in question has to be judged in the parameters of Sec.40(a)(iib) In our considered view this contention of the ld AR is completely out of context as we have already held that Sec.40(a)(ii) is not relevant to the present issue before us at all. Moreover, the levy of interest on delayed payment of TDS u/s.201(1A) though held to compensatory in nature, the allowability of the same cannot be decided simply based on that. The levy of 201(1A) is a levy for delay in the remittance of tax that is deducted and not paid into the government account and is levied towards the use of funds belonging to the exchequer. The interest u/s.201(1A) can be equated to the levy of interest u/s.234. Interest u/s.234 is a levy on delay in the payment of income tax and the TDS is nothing but the income tax paid on behalf of the payee and therefore the interest on the same u/s.201(1A) is also in the nature of interest levied on the income tax. On that count also interest on delayed payment of TDS cannot be claimed as a deduction. Comparison of the provisions of section 40(a)(ii) and section 179 - Section 179 is a provision for recovery from the directors of a private company and in that context the legislature has defined the word ‘tax due’ . As we have already held that Section 40(a)(ii) is not applicable to the present case at all, we are of the view that the contentions raised in this regard are untenable.
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