TMI Blog2018 (7) TMI 1844X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the due date of filing of the return of income, following the decision of in case of CIT vs. Jaipur Vidyut Vitran Nigam Limited [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] the addition made by the AO is hereby deleted. Disallowance of interest on late payment of TDS u/s 201 and interest towards late payment of ESI - Held that:- As regards the interest on late deposit of ESI contribution is concerned, the Hon'ble Karnataka High Court in case of CIT vs. Mysore M/s Sand Plast India Limited, Alwar vs. DCIT, Alwar Electrical Industries Ltd. [1991 (3) TMI 30 - KARNATAKA HIGH COURT] has held that interest so paid by the assessee was not in the nature of penalty and therefore, allowable as deduction in the hands of the assessee. Respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. In grounds nos. 2 to 5, the assessee has challenged the additions u/s 41(1) on account of certain outstanding amounts treating them as M/s Sand Plast India Limited, Alwar vs. DCIT, Alwar bogus liability and at the same time, ceased to exist by the Assessing Officer. It was submitted by the ld. AR that the matter is squarely covered by the decision of the Co-ordinate Bench in assessee's own case in ITA No. 714/JP/2017 dated 22/12/2017 for AY 2012-13. It was submitted by the ld. AR that the AO has treated the liability as bogus and at the same time, has treated the said liability as ceased to exist. It was submitted by the ld. AR that the bogus liability does not come under the purview of 41(1) as held by the Co-ordinate Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Office was of the view that liabilities are bogus and ceased to exist. In our view, the liabilities which are bogus would not be within the purview of section 41(1) of the Act; however, the trading liabilities which ceased to exist would fall within the purview of section 41(1) of the Act. Therefore, both liabilities which are bogus cannot be treated as liability which ceased to exist in fact cessation of liability would be where if trading liability was existed. In the case of bogus liability, which was not in existence from the time of inception, cannot be treated to be ceased to exist. Hence, the authorities below have failed to appreciate this aspect of the matter. Admittedly, the Ld. CIT(A) has not accepted the explanation that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of delay in deposit of employees' contribution towards ESI and PF. In this regard, the ld. AR has drawn our reference to the assessment order wherein at page 8, it has been stated that all the contributions were paid during the relevant previous year with the exception of month of March which was paid in M/s Sand Plast India Limited, Alwar vs. DCIT, Alwar May, 2013. It was submitted by the ld. AR that all the amounts have thus been paid before the due date of filing of the return of income. 7. It was further submitted that in the previous AY 2012-13, the ld.CIT(A) himself has granted the relief to the assessee. It was further submitted that the issue is covered by the decision of Hon'ble Rajasthan High Court in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the same, the interest of ₹ 721/- on late payment of ESI is hereby allowed. 11. As far as interest on late payment of TDS u/s 201 (1A) is concerned, useful reference can be drawn to the decision of Hon'ble Bombay High Court in case of Ferro Alloys Corporation Ltd vs. CIT (1992) 196 ITR 406 (Bom) where interest payment u/s 201(1A) for failure to deduct or pay tax deducted at source was held not deductible. A Similar view has been taken by the Madras High Court in case of CIT vs. Chennai Properties Investment Ltd., (1999) 239 ITR 435 (Mad) wherein it was held as under (Head notes): The liability for deduction of tax arises by reason of the provisions of the Act. Under section 201, the consequence of failure to comply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own business. The Supreme Court in the case of Bharat Commerce Industries Ltd. v. CIT [1998] 230 ITR 733/ 98 Taxman 151rejected the argument that retention of money payable to the State as tax or income-tax would augment the capital of the assessee and the expenditure incurred, namely, interest paid for the period of such retention, would assume the character of business expenditure. It held that an assessee could not possibly claim that it was borrowing from the State the amounts payable by it as income-tax, and utilising the same as capitalization in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure. Therefore, the interest paid under section 201(1A) could n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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