Interest paid on delayed payment of statutory dues

hi all,

i've a doubt reg sec37 of income tax .

the provision says 

[Explanation.—For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]” 

Thus my doubt is whethere Interest paid on delayed payment of statutory dues can be treated as offence or prohibition of law and then disallow the same ? Or i have read in so many forums in CACLUBINDIA stating it can be allowed.

 

Please Clarify with case law or sections .

Thanks in advance.

Replies (2)

Interest paid under any other law is allowed because you are paying interest as a compensation for not paying the sums due on time.However interet paid under income tax Act is not allowed 

Even certain penalties can be allowed IF they are in nature of compensation, eg penalty for breach of contract.

See- Malwa Vanaspati & chemicals Co. SC

 

Thank u @ Z :)

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