Interest on Delayed Payment of VAT and TDS is Compensatory in Nature: ITAT allows Deduction [Read Order]

The Cochin bench of Income Tax Appellate Tribunal (ITAT) restored the decision of CIT(A) and held that interest on delayed payment of VAT and TDS is compensatory in nature and also deleted the disallowance.

The bench comprising Judicial Member George George K and Accountant Member Chandra Poojari were held so while considering the case of The Income Tax Officer versus M/s.Lakshdweep.

The sole issue raised by Revenue before ITAT was against the order of first appellate authority regarding the interest on delayed payment of VAT and TDS are allowable expenditure. In instant case AO disallowed certain amount of interest on delayed payment of VAT and TDS and claimed the same as penal in nature which cannot be termed as business expenditure.

On appeal before first appellate authority , the CIT (A) completely deleted the disallowance and held that interest on delayed payment of VAT and TDS is not in the penal nature.

The bench heard the rival submissions and perused the documents and observed that “the CIT(A) has correctly deleted the disallowance made for the interest expenditure claimed on delayed payment of VAT and TDS.”