Interest on TDS being compensatory in nature is allowable u/s 37(1)

Manglam Arts Vs PCIT (ITAT Jaipur)

ITAT Jaipur held that interest paid on TDS is compensatory in nature and is a business expenditure allowable u/s 37(1) of the Income Tax Act

Facts- The assessee is engaged in the business of manufacturing and export of wooden handicrafts, durries, rugs, textile items, etc. AO completed assessment u/s. 143(3) after making addition towards litigation expense and employee’s contribution to provident fund.

PCIT issued notice u/s 263 and directed AO to make disallowance u/s 14A; penalty & fine; interest on delayed payment of TDS; u/s. 40(a)(ia) and prior period expenses.

Conclusion- Held that payments towards late fees for filing TCS/ GST Return is not an offence prohibited by law. Hence, the ground of the assessee is allowed.

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