Tds liability on Interest on delayed payment of purchase bills !

No TDS is liable to be deducted in case of interest accurued due to trading liability

ITO vs. Parag Mahasukhlal Shah, the Hon’ble tribunal (Ahmedabad Bench) held that a payment which has direct nexus with the trading liability being connected with the delayed purchase payments will not be regarded as Interest as defined in Section 2(28A).[2011 (46) SOT 302]

Similar view has been taken by the Hon’ble Tribunal (Hyderabad Bench) in case of Sri Venkatesh Paper Agencies (Hyd.) Pvt. Ltd. vs. DCIT. [ITA No. 636 of 2011].

So it can be concluded that such interest doesn’t fall under section 194A and therefore no TDS is deductible under such a case.