Case Law Details
M/s. Emdee Digitronics Pvt. Ltd Vs PCIT (ITAT Kolkata)
Conclusion: Interest paid on late deposit of VAT, Service Tax, TDS etc, was not penal in nature and the same was allowable as business expenditure under section 37(1).
Held:
CIT exercised his jurisdiction under section 263 to revise the order passed by AO under section 143(3) on the ground that assessee company had debited expenditure under the head Interest on delay payment of VAT, Service Tax and TDS and since such expenses were penal in nature, was not deductible u/s 37(1). However, during the scrutiny assessment u/s 143(3), these expenses were allowed as deduction, therefore order passed by the AO was erroneous and prejudicial to the interest of the Revenue. It was held assessee had himself confessed and accepted that the (interest on VAT, service tax, TDS etc.) expenses were not allowable expenditure under section 37(1), being penal in nature, did not mean that these expenses should be disallowed. If the expenses (interest on late deposit of VAT, service tax, TDS etc expense) were allowable under the Act then these could not be disallowed merely because assessee had admitted. Right expenditure ought to be allowed and the right income ought to be taxed. It was abundantly clear that interest on late deposit of VAT, service tax, TDS etc were allowable expenditure under section 37(1) and AO had taken a possible view therefore order passed by AO U/s 143(3) was neither erroneous nor prejudicial to the interest of Revenue and could not be held to be unsustainable in law.
FULL TEXT OF THE ITAT JUDGEMENT
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