Interest on tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 December 2013 Dear all

My question is, if interest on tds is paid then this will disallow u/s 37 if yes then there are so many judicial decision which says that interest on statutory dues will no disallow as full.
Please answer

Ganeshbabu K

Ganeshbabu K (Expert)
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20 December 2013 In my opinion interest on TDS is allowed as expence as it is compensatory in nature,,

1)Honble Karnataka High Court in the matter of CIT v. Oriental Insurance Co Ltd [2009] 183 TAXMAN 186 {KAR} has held that Section 201(1A) is a provision to levy interest for delayed remittance of the TDS.

2)It is the practice of the revenue that for belated payment of tax for any reasonable cause, the assessee is liable to pay interest at the rate of 12 per cent per annum.

3)Similarly, for refunds, the revenue pays interest to the assessee. Therefore, the levy of interest under section 201(1A) cannot, at any rate, be construed as penalty.Hence, it will be of immense use to rely on this case regarding the allowance of the Interest on late payment of TDS.

Hence Interest on late payment of tds is allowed

Ofcourse i do agree if interest is in the nature of offence or penalty definetely it is disallowed