DCIT Vs Mahalaxmi Infracontract Ltd. (ITAT Ahmedabad)
Brief facts: The Assessing Officer made disallowance of ₹ 2,94,25,669/- on account of interest on GST and also disallowed GST late filing fee of ₹ 6,63,133/-. In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee by holding that the aforesaid expenditures are not for violation of any law and are only compensatory in nature and hence the same are allowable as a deduction under section 37 of the Income Tax Act (“Act”).
Observations:
The Hon’able ITAT Observed that nothing has been brought on record by the Department to demonstrate that the aforesaid interest on GST and GST delayed filing fee was for infraction/violation of any law and no specific infirmity was pointed out in the order passed by Ld. CIT(Appeals).
Cases relied –
Mahalakshmi Sugar Mills Co. vs. Commissioner of Income-tax [1980] 123 ITR 429 (SC)/[1980] 16 CTR 198 (SC)[09-04-1980], the Hon’ble Supreme Court held that interest paid to Government for delay in payment of cess cannot be described as a penalty paid for an infringement of law. While passing the order, Hon’ble Supreme Court made the following observations:
It is apparent that section 3(2) of the 1956 Act requires the payment of cess on the date prescribed under the U.P. Sugarcame Cess Rules, 1956. If the cess is not paid by the specified date, then by virtue of section 3(3) of the 1956 Act the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment. Section 3(5) of the 1956 Act is a very different provision. It does not deal with the interest paid on the arrear of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon.
