Prince Holdings Madras (P) Ltd Vs DCIT (ITAT Chennai)
Interest paid on belated payments of service tax is allowable for deduction u/s 37(1) IT Act
The Income Tax Appellate Tribunal, Chennai (“the ITAT”) in Prince Holdings Madras (P) Ltd v. Deputy Commissioner of Income Tax [ITA No.: 524/Chny/2021 dated November 2, 2022] held that the interest paid on belated payments of service tax is allowable for deduction under Section 37(1) of the Income Tax Act, 1961 (“the IT Act”).
Facts:
Prince Holdings Madras (P) Ltd (“the Appellant”) is an investment company, whose main business is to invest in shares, immoveable property and also providing consultancy services. The Appellant filed return of its income for the Assessment Year (“A.Y.”) 2017-18 on October 30, 2017 by admitting Nil total income. The assessment was completed under Section 143(3) of the IT Act on December 16, 2019, whereby the Assessing Officer (“AO”) made an addition of Rs.4,03,000/- towards interest on service tax under Section 37(1) of the IT Act considering the same is in the nature of penalty.
The Appellant challenged the addition of Rs. 4,03,000/- before the first Appellate Authority i.e. Deputy Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“CITA NFAC”), Delhi, (“the Respondent”). The Respondent dismissed the appeal and confirmed the addition made by CITA NFCA vide its Order in Appeal dated October 1, 2021 (“OIA”). Therefore, the Appellant filed the appeal before the ITAT.
Issue:
Whether the interest paid on belated payments of service can be disallowed under the IT Act?
Held:
The ITAT held as under:
