Interest , late fee demand is allowed or not
This query is : Resolved
03 September 2016
in income tax int on late payment of TDS sales tax, service tax is allowed as deduction or not....
demand of income tax ,sales tax ,TDS is allowed or not....please help me ...thanks
04 September 2016
Interest on TDS is levied under section 201(1A) of the Income tax Act,1961. The
said expenditure will not be allowed as a business expenditure.
Citation: Madras high court decision
in CIT V Chennai Properties & Investments Ltd reported in 239 ITR 435
said expenditure will not be allowed as a business expenditure.
Citation: Madras high court decision
in CIT V Chennai Properties & Investments Ltd reported in 239 ITR 435
04 September 2016
Interest on late payment of VAT is compensatory in nature and hence allowable as business expenditure.
In 'Lachmandas Mathuradas V. Commissioner of Income Tax' - 2008 -TMI - 6074 - Supreme Court the question before the apex court was whether interest paid on arrears of sales tax is penal or compensatory. The apex court held that the said amount was an allowable deduction since it was compensatory in nature.
Also refer the following article in this regard--
http://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=788
In 'Lachmandas Mathuradas V. Commissioner of Income Tax' - 2008 -TMI - 6074 - Supreme Court the question before the apex court was whether interest paid on arrears of sales tax is penal or compensatory. The apex court held that the said amount was an allowable deduction since it was compensatory in nature.
Also refer the following article in this regard--
http://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=788
04 September 2016
thank you sir... what about service tax int and late fee
01 August 2024
Interest and penalties related to late payments of various taxes have different treatments for tax purposes under the Income Tax Act. Here's a detailed breakdown:
### **1. Interest on Late Payment of Taxes**
#### **a. Income Tax**
- **Interest on Late Payment of Income Tax**:
- **Section 234A/B/C**: Interest under these sections is levied for late payment or under-reporting of income. This interest is not deductible for income tax purposes. It is considered a personal liability and does not qualify as a business expense or deduction.
#### **b. Sales Tax/VAT**
- **Interest on Late Payment of Sales Tax/VAT**:
- **Deductibility**: Interest paid on delayed sales tax or VAT payments is generally not allowed as a deduction under the Income Tax Act. The reason is that such interest is considered a penalty or additional charge, rather than a regular business expense.
#### **c. Service Tax**
- **Interest on Late Payment of Service Tax**:
- **Deductibility**: Interest paid for late payment of service tax is also not deductible. The same principle applies, as it is considered a penalty or additional charge for the delay.
### **2. Penalties for Late Payment**
#### **a. Income Tax**
- **Penalties**:
- **Section 271**: Penalties under this section for defaults like late filing or under-reporting are not deductible expenses for tax purposes. They are considered a consequence of non-compliance and do not qualify as a business expense.
#### **b. Sales Tax/VAT**
- **Penalties**:
- **Deductibility**: Penalties for late payment of sales tax or VAT are not allowed as deductions. Similar to interest, these are seen as penalties for non-compliance rather than business expenses.
#### **c. Service Tax**
- **Penalties**:
- **Deductibility**: Penalties related to late payment of service tax are also not allowed as deductions under the Income Tax Act.
### **3. General Rule**
The general rule under the Income Tax Act is that any interest, penalty, or fee that is paid for late compliance with tax obligations (income tax, sales tax, service tax) is not deductible. This is because such payments are considered to be penalties or additional charges for non-compliance and do not constitute a genuine business expense.
### **Summary**
- **Interest on Late Payment of Income Tax**: Not deductible.
- **Interest on Late Payment of Sales Tax/VAT**: Not deductible.
- **Interest on Late Payment of Service Tax**: Not deductible.
- **Penalties for Late Payment**: Not deductible for income tax, sales tax, or service tax.
**Recommendation**: For precise handling of these issues and to ensure compliance with current tax regulations, it is advisable to consult with a tax professional or accountant who can provide guidance based on your specific circumstances and the latest updates in tax laws.
### **1. Interest on Late Payment of Taxes**
#### **a. Income Tax**
- **Interest on Late Payment of Income Tax**:
- **Section 234A/B/C**: Interest under these sections is levied for late payment or under-reporting of income. This interest is not deductible for income tax purposes. It is considered a personal liability and does not qualify as a business expense or deduction.
#### **b. Sales Tax/VAT**
- **Interest on Late Payment of Sales Tax/VAT**:
- **Deductibility**: Interest paid on delayed sales tax or VAT payments is generally not allowed as a deduction under the Income Tax Act. The reason is that such interest is considered a penalty or additional charge, rather than a regular business expense.
#### **c. Service Tax**
- **Interest on Late Payment of Service Tax**:
- **Deductibility**: Interest paid for late payment of service tax is also not deductible. The same principle applies, as it is considered a penalty or additional charge for the delay.
### **2. Penalties for Late Payment**
#### **a. Income Tax**
- **Penalties**:
- **Section 271**: Penalties under this section for defaults like late filing or under-reporting are not deductible expenses for tax purposes. They are considered a consequence of non-compliance and do not qualify as a business expense.
#### **b. Sales Tax/VAT**
- **Penalties**:
- **Deductibility**: Penalties for late payment of sales tax or VAT are not allowed as deductions. Similar to interest, these are seen as penalties for non-compliance rather than business expenses.
#### **c. Service Tax**
- **Penalties**:
- **Deductibility**: Penalties related to late payment of service tax are also not allowed as deductions under the Income Tax Act.
### **3. General Rule**
The general rule under the Income Tax Act is that any interest, penalty, or fee that is paid for late compliance with tax obligations (income tax, sales tax, service tax) is not deductible. This is because such payments are considered to be penalties or additional charges for non-compliance and do not constitute a genuine business expense.
### **Summary**
- **Interest on Late Payment of Income Tax**: Not deductible.
- **Interest on Late Payment of Sales Tax/VAT**: Not deductible.
- **Interest on Late Payment of Service Tax**: Not deductible.
- **Penalties for Late Payment**: Not deductible for income tax, sales tax, or service tax.
**Recommendation**: For precise handling of these issues and to ensure compliance with current tax regulations, it is advisable to consult with a tax professional or accountant who can provide guidance based on your specific circumstances and the latest updates in tax laws.
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