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?
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  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  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.  88 Taxman 184/218 ITR 526 (Guj.)/CIT v. Raipur Manufacturing Co. Ltd.  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  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  254 ITR 799/122 Taxman 828(SC)/CIT v. Western India State Motors  167 ITR 395 (Raj.)/CIT v. Western Indian State Motors  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.  163 ITR 420 (AP)/CIT v. Shri Sarvaraya Sugars Ltd.  163 ITR 429 (AP)/Mahalaxmi Sugar Mills Co. Ltd. v. CIT  157 ITR 683 (Delhi).