Interest Paid on Delayed Payment of TDS u/s 201(1A) of Income Tax Act is not Eligible for Allowance as Business Expenditure: ITAT [Read Order]

The Pune bench of the Income Tax Appellate Tribunal (ITAT) held that the interest paid on delayed payments of Tax Deducted at Source (TDS) under Section 201(1A) of the Income Tax Act, 1961 is not eligible for allowances as business expenditure.

The assessee challenging the action of the Commissioner of Income Tax (Appeal) [CIT(A)] in confirming the order of the Assessing Officer in levying interest for delayed payment of Tax Deducted at Source (TDS) to the Central Government account in the facts and circumstances of the case.

The assessee treated interest paid for delayed payment of TDS as business expenditure and claimed deduction thereon.

According to the Assessing Officer, the assessee is well aware that the said expenditure is not allowable as a deduction and referred to disallowance made by the assessee on its own in the original return of income and claimed the same as business expenditure in the revised return of income.

The Assessing Officer disallowed an amount of Rs.24,18,553/- by denying the assessee’s claim, added to the total income of the assessee. The CIT(A) confirmed the order of the Assessing Officer in denying the claim of the assessee as a deduction.

In the case of Chennai Properties & Investment Ltd. reported in (1999) 239 ITR 435 (Mad.) which held the interest paid under Section 201(1A) of the Income Tax Act by the assessee does not assume the character of business expenditure and also cannot be regarded as compensatory payment.

The Authorized Representative did not dispute the same.

The Two-member bench comprising of R.S. Syal (Vice-President) and S.S. Viswanethra Ravi (Judicial member) held that the interest paid on delayed payment of TDS to the Central Government account is not eligible for allowance as business expenditure, consequently, the deduction claimed by the assessee is liable to be denied.

Therefore, the appeal of the assessee was dismissed.

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