Case Law Details
Expat Engineering India Ltd. Vs ACIT (ITAT Bangalore)
In a recent case, Expat Engineering India Ltd. faced a challenge regarding the disallowance of interest on delayed Tax Deducted at Source (TDS) payment. The Income Tax Appellate Tribunal (ITAT) in Bangalore, while considering Ground Nos. 3 & 4, explored whether the interest paid on late payment of TDS is a deductible business expense. Let’s delve into the details of the case and the Tribunal’s decision.
Case Background: Expat Engineering India Ltd. argued that the interest paid on late TDS payment is not in the nature of a penalty, emphasizing that disallowance of the interest is unwarranted. They contended that the interest on late payment of TDS under section 201/201(1A) is an allowable business expense.
Tribunal’s Analysis: The Tribunal considered similar issues in a prior case (ITA No.503/Bang/2022) and referred to the decision dated 1.8.2022. In that case, the Tribunal held that interest on delayed payment of TDS cannot be allowed as a deduction. The Tribunal cited the Hon’ble Madras High Court’s view that interest paid under section 201(1A) is in the nature of tax and cannot be considered a compensatory payment.
Relevant Observations: The Tribunal referred to the decision in Velankani Information Systems Ltd., emphasizing that interest on delayed TDS payment cannot be allowed as a deduction. The Madras High Court’s stance, stating that interest paid under section 201(1A) does not assume the character of business expenditure, was highlighted.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
