In a major Setback to the Sahara India Life Insurance, the Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the Interest on TDS is not an allowable expenditure under Income Tax.
The assessee, Sahara India Life Insurance Co. Ltd. is a company carrying on life insurance business. It got the licence to commence business on 6th February, 2004 and the business operations started on 30th October, 2004. It filed its return of income on 27.11.2014 declaring total income at Rs.50,76,46,500/-.
The CIT(A) deleted the addition of Rs.960/-, Rs.6,62,612/- and Rs.31,63,861/- on account of disallowance of interest on TDS, bonus not paid during the financial year, and leave encashment not paid during the financial year respectively though the assessment of an insurance company has to be made in accordance with the provisions of section 44 of the Income Tax Act, 1961 and the provisions of section 28 to 43B of the Act are not applicable in the case of Life Insurance Business.
The revenue contended that the Ld. CIT(A) has erred in deleting an addition of Rs.960/- made by AO on account of ‘Interest on TDS’.
The coram of Judicial Member Sudhanshu Shrivastava and Accountant Member R.K. Panda noted that , the AO made the addition on the ground that Rs.960/- has been debited under the head ‘Miscellaneous expenses’ being interest on TDS which, according to him, is inadmissible under section 40(a) of the Income Tax Act. The CIT(A) deleted the same by following the orders of his predecessors for preceding assessment years.
The ITAT opined that interest on TDS is not an allowable expenditure in the light of the decisions of Supreme Court in the case of Bharat Commerce & Industries and the decision of Calcutta High Court in the case of Martin & Harries (P) Ltd. Vs. CIT.
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