Case Law Details
Trinity Infraventures Limited Vs ACIT (ITAT Hyderabad)
There is no dispute as to the facts that the assessee failed to deposit the TDS amount within time and, therefore, deposited the same with interest of Rs. 29,35,279/- which they claimed as deduction under section 37 of the Act stating that mere enlargement of the amount of TDS with the inclusion of interest, does not take away its character as being TDS to be allowed under section 37 of the Act. Only question therefore, that falls for our consideration is whether this interest partakes the character of a penalty or to be construed as payment for breach of law, so as to be disallowed under section 37 of the Act.
In Mahalakshmi Sugar Mills Co.(supra), while considering the nature of interest paid on the delayed payment of cess under the provisions of UP Sugarcane Cess Act, 1956, the Hon’ble Apex Court held that when there are provisions dealing with penalty specifically in the enactment, and the enlargement of any amount automatically, without the intervention of any order giving rise to the liability such enlargement, such additional amount will not be a penalty, but only compensatory in nature. In Oriental Insurance Company Ltd., (supra), the Hon’ble Karnataka High Court clearly held that section 201(1A) of the Act is a provision to levy interest for delayed remittance of TDS and it is the practice of the Revenue that for delayed payment of tax for any reasonable cause, the assessee is liable to pay interest at stipulated rate and also paying interest on the delayed payments to the assessees, and, therefore, interest paid for delayed deposit of TDS cannot be equated to penalty or breach of law.
In Crustum Products P. Ltd., (supra), a Co-ordinate Bench of this Tribunal held that the interest levied towards the late payment of TDS is only damages thrust on the assessee for late payments of dues to the Revenue. In Mercury Projects (supra), the Co-ordinate Bench held that the interest on TDS is not interest paid on per se and the same is in the nature of compensation and not penal. In Resolve Salvage & Fire India (P.) Ltd., (supra), the Tribunal after noticing the decisions in the case of Ferro Alloys Corporation Ltd., Vs. CIT (1992) 196 ITR 406 (Bom), Bharat Commerce Industries Ltd., Vs. CIT (1985) 20 Taxman 302 and Setup Consultants Pvt. Ltd., Vs. ACIT in ITA No. 5827/Mum/2012 by order dated 11/12/2018 observed that the interest paid on delayed payments of TDS under section 201(1A) of the Act is an allowable deduction. Lastly, in the case of M/s. Taksheel Solutions Limited (supra), it was held that the interest on TDS is not interest paid on income tax per se and the disallowance thereof, is unwarranted.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Please become a Premium member. If you are already a Premium member, login here to access the full content.
16.08.2022 – Rajendra Sukhdev Mirgane Vs DCIT (ITAT Pune) – it was held that interest on delayed payment of TDS is not allowable – now – 13.10.2022 – Trinity Infraventures Limited Vs ACIT (ITAT Hyderabad) says such interest is allowable as deduction