Disallowance of interest on delayed payment of taxes

IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “C”, MUMBAI

BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND
SHRI M. BALAGANESH, ACCOUNTANT MEMBER

ITA NO.7990/MUM/2019 (A.Y. 2014-15)

Clean Coats Pvt. Ltd.
K-30/1, Additional Ambarnath,
Industrial Area, MIDC Anand Nagar,
Ambernath (East), Thane-421506.
PAN: AABCC2331C

vs

ITO- 14(1)(2),
Room No. 457, Aayakar Bhavan,
M.K. Road, Mumbai-400020.

Appellant by : Ms. Radha Halbe

Respondent by : Ms. Shreekala Pardeshi

Date of hearing : 05/08/2021

Date of pronouncement : 30/08/2021

ORDER

1. Ms. Radha Halbe appearing on behalf of the assessee submitted that the solitary issue raised by the assessee in appeal is against disallowance of interest on delayed payment of taxes. The ld. Authorized Representative (AR) submitted that during the period relevant to AY under appeal, the assessee had paid interest of Rs. 1,52,676/- on delay in payment of sales tax. The assessee claimed the said amount as Business Expenditure under section 37(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], however, the same was disallowed by the Assessing Officer (AO).

2. Both sides heard, orders of the authorities below examined. At the outset we may record that the ld. AR of the assessee has not made any submission assailing ex-parte proceedings before CIT(A) nor any ground has been raised in the grounds of appeal on this point. Therefore, it is deemed that the assessee is not aggrieved by the ex-parte proceedings before the CIT(A).

3. It is not the case of Revenue that the interest on delayed payment of tax which is subject matter of dispute is expressly not allowable under the provisions of Act. The case of AO is that being penal in nature it is not allowable. In the light of law expounded by Hon’ble Apex Court and facts of the case, we hold interest on delayed payment of tax being compensatory is allowable u/s. 37 of the Act. The impugned order is set-aside and appeal of the assessee is allowed.
Order pronounced in the open court on Monday, the 30th day of August, 2021.

Please find attached the enclosed file for the full judgement