Interest on VAT is Compensatory, Not Penal – ITAT Allows Deduction

Kankariya Automobiles Pvt. Ltd. Vs ITO (ITAT Pune) Interest on VAT is Compensatory, Not Penal – ITAT Allows Deduction The Pune ITAT in Kankariya Automobiles Pvt. Ltd. vs ITO allowed deduction of interest on delayed payment of VAT, holding that such interest is compensatory in nature and hence allowable as business expenditure. The assessee, a vehicle dealer, had debited ₹4.92 lakh towards VAT interest. The AO disallowed the same in a reassessment completed u/s 144, primarily due to non-compliance and the view that VAT was excluded from sales, making related interest non-deductible. The CIT...