Pure Spiritss Limited Vs ACIT (ITAT Patna)
Patna ITAT: Interest on Delayed Payment of Sales Tax, Service Tax & Employer’s PF Contribution Allowable; TDS Interest Not Deductible
The Patna ITAT partly allowed the assessee’s appeal by drawing a clear distinction between compensatory and non-deductible statutory interest under section 37(1). The Tribunal held that interest on delayed payment of sales tax/VAT, service tax and employer’s PF contribution is compensatory in nature and allowable as a business deduction, whereas interest on delayed remittance of TDS and employees’ PF contribution is not deductible, as such payments do not relate to the computation of business profits and cannot be regarded as expenditure incurred wholly and exclusively for business. The Tribunal also directed the Assessing Officer to verify the assessee’s claim that a portion of the interest had been disallowed twice, and to grant appropriate relief if the claim was found to be correct.
On the issue of section 14A read with Rule 8D, the Tribunal observed that if the assessee had not earned any exempt income during the relevant assessment year, no disallowance under section 14A could survive. The matter was restored to the Assessing Officer to verify whether any exempt income had actually been earned and, if not, to delete the disallowance in line with the Calcutta High Court decision in PCIT v. REI Agro Ltd. The appeal was accordingly partly allowed for statistical purposes.
List of Cases Discussed / Relied Upon
- Pure Spiritss Limited Vs ACIT (ITAT Patna); ITA No(s). 314/PAT/2026; 13/07/2026; 2017-18
- Analogics Tech India Ltd. v. DCIT (ITAT, Hyderabad)
- Shalimar Fabricators Pvt. Ltd. v. ITO (ITA Nos. 386 & 428/KOL/2021)
- Lachmandas Mathuradas v. Commissioner of Income-tax [2002] 122 Taxman 828 (SC)
- Bharat Commerce & Industries Ltd. v. Commissioner of Income-tax [1998] 98 Taxman 151 (SC)
- M/s New Modern Bazaar Departmental Store Pvt. Ltd. v. ITO
- CIT v. Chennai Properties & Investment Ltd. [1998] 98 Taxman 151 (SC)
- Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC)
- Principal Commissioner of Income-tax v. REI Agro Ltd.[2022] 140 taxmann.com 71 (Calcutta)
FULL TEXT OF THE ORDER OF ITAT PATNA
