Do you mean late filing penalty on TDS??
Dude, As far as I know, all types of penalties, interest for late payments were not allowed as an expense.
Simple rule is that "all expenses incurred for the business/profession" can be shown as deduction
extra expenses incurred for business/prof. due to the mnanagement delay that is not allowed as an expense..
For ex: Insurance policy remium - Rs.1000 late payment fee Rs.150.
Total premium paid is Rs.1150
While computation of Income of individual/Buss./Prof. only Rs1000 can be shown as a deduction but not Rs.1150