Interest paid on delayed deposit of income tax not allowable as expenditure

Apeejay Pvt Ltd Vs DCIT (ITAT Kolkata)

ITAT Kolkata held that interest payment on delayed deposit of income tax, whether TDS or otherwise is not an allowable expenditure.

Facts- The assessee is a private limited company engaged in the business of operating business centres and letting out. The major issues for consideration by the assessing officer were with regard to disallowance under section 14A of the Act as well as deemed dividend under section 2 (22)(e) of the Act. Another issue involved is regarding disallowance on account of interest on delay deposit of TDS and interest of delay payment of service tax.

Conclusion- Held that addition for deemed dividend can be made only in the hands of the shareholder of the lending company and since assessee is not a shareholder being a beneficial owner of shares holding not less than 10% of the voting power in the lending company, namely, Apeejay Tea Limited., Section 2(22)(e) of the Act cannot be invoked in the case of assessee in appeal before us.

Held that interest payment on delayed deposit of income tax, whether TDS or otherwise is not an allowable expenditure. Since the bifurcation of the alleged disallowance is not available on record, we direct the Assessing Officer to carry out the necessary exercise for which the assessee shall provide the related documents and then shall confirm the disallowance for the interest on delay in deposit of TDS and allow the interest paid on delay in deposit of service tax.

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