Allowable deduction in computation of total income. - Income Tax - 1022/CBDT

INSTRUCTION NO. 1022/CBDT Dated : November 9, 1976 Section(s) Referred: 37(1) Statute: Income - Tax Act, 1961 In instance has come to the notice of the Board where an assessee had paid interest to the Regional Commissioner of Provident Fund for failure to deposit employer's and employee's contribution to the provident fund in time. This payment of interest was claimed by the assessee as allowable deduction in the computation of his total income. The Income-tax Officer allowed the deduction while computing the total income. This was not in accordance with the provisions of the Income-tax Act, 1961. 2. The interest paid by the assessee for failure to comply with the statutory requirements, i.e., to deposit the provident fund contribution in time, partakes the nature of penalty for infraction of the law. The conditions laid down in section 37(1) for allowing expenditure are not satisfied in respect of such interest payment.