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Interest on late payment of statutary dues

This query is : Resolved 
 

(Querist)
22 May 2008

Dear Friends,

Pls.tell me whether interest paid on late payment of TDS,VAT,Service TAx,or any others statutary dues, which is allowable expenses as per income tax act.? & under what section it is mentioned is it allowable or not?

Pls.reply my queries.

Regards,
Prakash Jasani

email id: prakashjasani_56@rediffmail.com




S.Srinivasaraghavan (Expert)
22 May 2008

TDS no.
VAT and ST yes
Other statutory dues-can't say unless it is specified what statutory due.

Late CA Sampat Jain (Expert)
23 May 2008

Interest for late payment of direct taxes is not deductible - Interest levied on assessee for delay in filing return would not be allowable as business expenditure - Bharat Commerce & Indus­tries Ltd. v. CIT [1998] 230 ITR 733/98 Taxman 151 (SC).

Interest paid under section 215 for failure to pay advance tax up to statutory percentage would not be allowable as business ex­penditure - Bharat Commerce & Industries Ltd. v. CIT [1998] 230 ITR 733/98 Taxman 151 (SC).

Interest paid under section 220(2) for late payment of income-tax is not deductible as revenue expenditure - CIT v. Ashoka Mills Ltd. [1996] 88 Taxman 184/218 ITR 526 (Guj.)/CIT v. Raipur Manu­facturing Co. Ltd. [1996] 135 CTR (Guj.) 248.

Interest for delayed filing of return is not deductible - It cannot be said that interest paid for delay in filing the return has any connection with the business of the assessee. If income-tax is not a permissible deduction under section 37, any interest payable for default committed by the assessee in discharging its statutory obligation under the Income-tax Act which is calculated with reference to the tax or income, cannot be allowed as a deduction - Orient General Industries Ltd. v. CIT [1994] 209 ITR 490 (Cal.).
Interest paid on sales tax arrears is deductible - Interest paid by the assessee to the Sales-tax Department on arrears of sales tax is an admissible deduction under section 37(1) - Lachmandas Mathuradas v. CIT [2002] 254 ITR 799/122 Taxman 828(SC)/CIT v. Western India State Motors [1987] 167 ITR 395 (Raj.)/CIT v. Western Indian State Motors [1988] 174 ITR 116 (Raj.).

Interest on purchase tax arrears is deductible - Interest paid to the Government on arrears of purchase tax is deductible - CIT v. Chodavaram Co-operative Sugars Ltd. [1987] 163 ITR 420 (AP)/CIT v. Shri Sarvaraya Sugars Ltd. [1987] 163 ITR 429 (AP)/Mahalaxmi Sugar Mills Co. Ltd. v. CIT [1986] 157 ITR 683 (Delhi).





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