Penal interest allowance

Tax queries 309 views 1 replies

Dear Sir/Madam

                       One of the Private Limited Company who brought 10crores for its business expenditure as a overdraft facility provided by one of registered commercial bank. In between the repayment of loan the company has default for two days for which bank was charged the penal interest. Whether this penal interest is allowable by IT department or not? If it's so kindly provide which nature and section.

Replies (1)
Yes it is allowable expenditure as this is not an offence under any act..it is just a breach of terms of agreement..
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Explanation to Section 37(1) :

Expenditure incurred for any purpose which is an offence or prohibited by law shall not be allowed.


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