Delayed interest paid on service tax

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We are doing Cotton Business and also having a commercial complex which is let out to the various tenants. We have received rental income and collected service tax also. But we have not paid service tax regularly due to the writ petition pending in Hon’ble High court, Delhi. Even though writ petition pending in Delhi High Court , Now we have paid service tax and Interest also. The details of the same is given below.

 

Financial Year       Service Tax        Interest        Date of S.Tax      Date of Interest paid

                                   Payable                                        Paid

 

 2007-08                   1550000           135000            19/07/2011              15/08/2011

 2008-09                   1550000           155000            19/07/2011              15/08/2011

 2009-10                   1550000           165000            19/07/2011              15/08/2011

 2010-11                   1550000           175000            20/07/2011              15/08/2011

 2011-12                     775000           189000            20/07/2011              15/08/2011

 

 In this situation, whether the above interest is allowable or not for  the financial year 2010-11. Please advise me.

 

Replies (2)

Well According to me it wont be allowed.......

Hi Mr Babu

Legal position of the interest paid: - Any interest paid to any authority which is COMPENSATORY in nature is ALLOWED to be claimed in the books as an expense. However, interest paid which is in the nature of penalty is NOT ALLOWED.

Inference in your Case: -

In your case, the interest paid is in the nature of compensation which caused due to delayed payment of taxes to the govt, hence, ALLOWED.

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