General Deduction u/s 37

Sales Tax & Service Tax  interest & Penalties are allowed as expenditure. But i am not very sure.

Interest is deductible, penalty is not deductible.

Although i feel penalty should be deductible as expenditure as it is a civil liability. But law has to be amended for that.

Penalty for infraction of any law Not deductible, except where penalty is in compensatory nature or for breach of agreement.(as there is breach of contract not infraction of law)

Interest under income/wealth tax act:-not deductible.

Interest under any other law:-if compensatory :allowed, if penal, not allowed.

Interest on delay of Sale tax is allowable expenditure. But not penalty