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Case Law Details

Case Name : Universal Energies Ltd. Vs DCIT (ITAT Delhi)
Appeal Number : ITA No. 2761/Del/2018
Date of Judgement/Order : 26/07/2022
Related Assessment Year : 2012-13
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Universal Energies Ltd. Vs DCIT (ITAT Delhi)

Held that interest payment on late payment of TDS is not eligible business expenditure for deduction and it is not compensatory in nature.

Facts- The assessee vide its letter dated 12.03.2015 submitted copy of ledger account of interest on TDS. The assessee itself agreed that interest on TDS amounting to Rs. 9,70,248/- has not been added back in the computation of Income. Interest on TDS is not allowable as per provision of Income Tax Act, 1961. Accordingly, expenses of Rs. 9,70,248/- were disallowed and added back to the income of the assessee.

Conclusion- Held that there must be a loan on which interest is paid for claiming allowance u/s 36(1)(iii) of the Act. Existence of lender and borrower are must in case of a loan transaction. Hence, it can be safely concluded that non-payment of taxes does not amount to the borrowing of capital from the Government and hence interest paid for delayed deposit of taxes is not covered under section 36(1)(iii) of the Act.

Interest on late payment of TDS is not covered under Section 30-36 of the Act and thus qualifies for consideration u/s 37. It is neither capital expenditure nor personal expenditure of the Assessee. Further, Courts have time and again held that interest expenses on late payment of taxes which are compensatory in nature should be treated as expended wholly and exclusively for the purposes of the business or profession since responsibility of payment of taxes including deduction and remittance of TDS is part and parcel of the business operations and the assessee has no right to utilize such monies collected from others on behalf of the government.

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