Interest on direct & indirect tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2013 Can we Debited the Interest on late payment of Direct Tax & Indirect Tax to Profit & Loss a/c ( like TDS & Service Tax)?

CA Mehta Ankur N.

CA Mehta Ankur N. (Expert)
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14 January 2013 For direct tax , u can not, for indirect tax u can.

As it will be personal exp. in direct taxes, but u can debit in indirect taxes.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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14 January 2013 I agree with the expert.
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According to Section 40(a)(ii) Income Tax , Interest Payment in relation to Income Tax etc are not deductible.
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Similarly wealth tax is not deductible vide Section 40a(iia).
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Where as indirect taxes are generally deductible U/s 37(1) and interest on such tax payments , being compensatory in nature
is also allowable as deduction against the profits.
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So direct expenses are, if debited to P&L A/c, required to be added back in the profit at the time of computation of Income.

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