Disallowance of Interest on TDS u/s 37(1) is outside the purview of Section 143(1). ITAT allows interest as business expenditure
ABCAUS Case Law Citation:
ABCAUS 3712 (2023) (04) ITAT
Important Case Laws relied upon :
M/s. Hebe Infrastructure Pvt. Ltd.
M/s. Govindam Clearing Agencies Pvt. Ltd. Vs. DCIT
DCIT vs. M/s Narayani Ispat Pvt. Ltd.
There has been conflicting judgments on the above issue. Even penalty proceedings have been initiated u/s 271(1)(c) and/or 270A of the Income Tax Act on disallowance of the interest on TDS. In a recent judgment, ITAT has taken note of the diverse views and held that it is certainly a debatable issue.
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the adjustment u/s 37 of the Income Tax Act, 1961 (the Act) made by CPC.
The case of the assessee was that interest paid on late deposit of TDS is an allowable business expenditure u/s 37(1) of the Act.
The Tribunal observed that there were diverse view of ITATs on the subject. ITAT, Jaipur had adjudicated the identical issue against the assessee. Whereas, ITAT Kolkata decided the issue in allowed the appeal in favour of the assessee of the assessee. ITAT Delhi in a recent judgment took note of the above two decisions and opined that there are divergent views on the issue.
The ITAT Delhi held that whether interest paid by the assessee on delayed remittances of TDS is allowable expenditure or not is certainly a debatable issue and, therefore, is outside the scope of purview of the provisions of section 143(1) of the Act.
The Tribunal following the decision of the coordinate bench which held that the issue is debatable and outside the purview of section 143 (1) of the Act, set aside the orders of the authorities below on this issue and decided the issue in favour of the assessee.
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