Vyoma Technologies Private Limited Vs DCIT (ITAT Bangalore)
Interest & Late Fee Levied on Account of Non-Compliance of The Different Provisions Under the Different Act, Which Is Compensatory in Nature and Are Allowable
AO during the assessment proceedings found that the assessee has incurred certain expenses, like interest and late fee on account of delay in filing GST return, payment of Professional tax & licence fee, which according to the AO are prohibited under the provisions of law and hence the same were disallowed by invoking the explanation 1 to section 37(1). On appeal CIT(A) to held that , the impugned expenses were incurred by the assessee in violation of law and therefore the same was not allowed as deduction.
On further appeal the Bangalore Tribunal held that the interest in dispute was not charged by the revenue for committing any offence which was prohibited under the provisions of GST Act. The said interest and late fees are compensatory in nature which is allowable as deduction under the provisions of section 37(1). The Tribunal followed decision of the Delhi Tribunal in the case of ITO vs. Virtue Financial Services (P) Ltd regarding the payment made on account of delay in submitting statutory requirement/returns held that the same are compensatory in nature and allowable as business expenditure under section 37.
