Whether Penalty Or Fines Or Penal Interests Allowed As Expenditure Under Section 37(1) Of IT Act,1961

FCS Deepak Pratap Singh | Last updated: 26 October 2021

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This article clarifies whether penalties, fines, or penal interest can be claimed as deductible business expenses under Section 37(1) of the Income Tax Act, 1961. The deductibility hinges on the nature of the payment: if it's compensatory in character, it's generally allowed, but if it's penal or for an illegal purpose, it's not. The insertion of Explanation 1 to Section 37(1) by the Finance Act, 1998, explicitly disallows deductions for expenditures that are offences or prohibited by law.

INCOME TAX QUESTIONS ANSWERS SERIES PART-XV Whether Penalty/Penal Interest is allowed as deductible expenditure under provisions Section37(1) of the Income Tax Act, 1961 Dear Friends, In this article we are going to discuss a problem, whether Penalty/Penal Interest levied on any organizati

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1999

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3499

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About the Author

FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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