Interest payment on delayed deposit of income tax or TDS not an allowable expenditure: ITAT
The Income Tax Appellate Tribunal(ITAT Kolkata) in the matter of Shree Automotive Pvt. Ltd. vs. Deputy Commissioner of Income Tax has ruled out that Interest payment on delayed deposit of income tax or TDS not an allowable expenditure.
Brief facts of the case are that assessee is engaged in the business as authorised dealer and service centre of Ashok Leyland Ltd. and Mahindra & Mahindra Ltd. Assessee deals in trading i.e. purchase and sale of vehicle s and its spares. It is also engaged in providing servicing of vehicles. Return for the year was filed on 28.09.2012 reporting total income of Rs.1,18,75,637/-. In the course of assessment, Ld. AO enquire d about various aspects of claims made by the assessee in its return for which explanation with supporting documents and evidences we recalled for, and were duly complied with by the assessee. Assessment was completed on assessed total income of Rs.5,39,45,370/-. Additions/disallowances made in arriving at the said assessed total income are challenged by the assessee in the grounds stated above.
Considering the facts and finding, claim of the assessee is disallowed since in the present case also the donee trust is same i.e. School of Human Genetics & Population Health (SHGPH). Accordingly, grounds taken by the assessee in this respect are dismissed.
On the last issue relating to disallowance of Rs.5,04,790/- on account of interest expenses for late payment of statutory liabilities, in the remand report, ld. AO has considered the submissions made by the assessee, wherein details of interest on late payment of various statutory liabilities were furnished. Ld. AO has accepted the submission of the assessee by allowing the claim in respect of interest on all the statutory liabilities except on account of TDS, amounting to Rs.8,428/-. All the other statutory liabilities are in respect of indirect taxes namely, VAT, Entry Tax, Service Tax, CST and education cess on service Tax. In this respect, we are in agreement with the finding given by the Ld. AO in the remand report. This issue of disallowing interest on delayed deposit of TDS has been dealt with by the Coordinate Bench of ITAT, Kolkata in the case of Premier Irrigation Adritec Pvt. Ltd. Vs. ACIT in ITA No. 387/Kol/2021 dated 20.01.2023. While dealing with this issue, the Coordinate Bench observe d in para 21 that “At this stage, it is pertinent to mention here, that it is not all type of taxes that are not allowable as deduction under the Income Tax Act, but the question before us is of the allowability of interest on delayed payment income tax itself. Certain taxes such as sales tax, excise or custom duty etc. which go on to increase the purchase cost of the goods or raw material etc. are allowed as deduction under the income tax Act for arriving at the profits earned. Therefore, an interest paid on delayed payment of sales tax etc. being adding to the cost/purchase price or decreasing the profit margin on sales may be taken into account for computation of profit or to say computation of taxable income, but that concession is not available in respect of interest on Income tax. Hence, any case laws dealing with the levy of indirect taxes and interest thereupon are not applicable for the purpose of interpretation of the relevant provisions of the Income Tax Act.” The Coordinate Bench thus, held that the interest payment on delayed deposit of income tax whether TDS or otherwise is not an allowable expenditure.
Considering the said decision, we uphold the disallowance of Rs.8,428/- and also uphold the relief granted for the balance claim. Accordingly, grounds taken in this respect are partly allowed.
In the result, appeal of the assessee for AY 2012-13 is allowed and appeal for AY 2013-14 is partly allowed.
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