interest on delayed payment of TDS

This query is : Resolved

manish (Querist)
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16 September 2010 is the interest paid on delayed payment of TDS was disallowed under income tax if yes in which section please suggest me

thanks in advance

Aditya Maheshwari

Aditya Maheshwari (Expert)
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16 September 2010 COMMISSIONER OF INCOME TAX vs. CHENNAI PROPERTIES & INVESTMENT LTD.
HIGH COURT OF MADRAS
R. Jayasimha Babu & N.V. Balasubramanian, JJ.
Tax Case No. 468 of 1986
20th April, 1998
(1999) 239 ITR 435 (MAD) : (1999) 105 TAXMAN 346 (MAD)
Legislation referred to
Sections 201(1A), 37,
Case pertains to
Asst. Year 1981-82
Decision in favour of
Revenue

Business expenditure—Interest paid on agricultural loans—Interest under s. 201(1A)— Interest paid for period of delay takes colour from the nature of principal amount required to be paid but not paid within time—Principal amount here would be income-tax and interest is payable for failure to pay the tax deducted at source—The fact that income-tax required to be remitted was not income-tax payable by assessee but on behalf of another does not in any manner after the character of payment—Income-tax is not allowable as business expenditure—Amount not deducted and remitted has the character of tax—Therefore, interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction.

Conclusion
Interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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16 September 2010 Interest paid on late payment of tds is penal nature hence it is not allowed as expenses.

Mr. Aditya has refered the good case for supporting it.

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