INTEREST PAID

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Querist : Anonymous

Querist : Anonymous (Querist)

26 August 2010 WHEATHER INTEREST PAID ON TDS, VAT,CST PAYMENT (LATE PAYMENT) IS ALLOWED UNDER INCOME TAX ACT,

CA Kalpesh Gokani

CA Kalpesh Gokani (Expert)
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26 August 2010 Interest on VAT, CST is allowable u/s 37 but int. in TDS is not allowed.

Querist : Anonymous

Querist : Anonymous (Querist)

26 August 2010 MAY I KNOW REASON BEHING NOT ALLOWING INTEREST ON TDS.

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CA Kalpesh Gokani

CA Kalpesh Gokani (Expert)
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26 August 2010 I also think that it should be allowed, but TDS is considered as Income Tax and Income Tax, int. on income tax and penalty under IT Act is not allowed as expenses under IT Act, so ITO disallowes int. on TDS as of now.

Querist : Anonymous

Querist : Anonymous (Querist)

26 August 2010 ur telling it as by your own thinking....

or it written in act,
or any case law for that.

bcoz interest amt is huge where i m auditing.

CA Kalpesh Gokani

CA Kalpesh Gokani (Expert)
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26 August 2010 please followe the following link

https://www.caclubindia.com/forum/interest-on-tds-allowability-as-expense-47959.asp

Aditya Maheshwari

Aditya Maheshwari (Expert)
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26 August 2010 COMMISSIONER OF INCOME TAX vs. CHENNAI PROPERTIES & INVESTMENT LTD.
HIGH COURT OF MADRAS
R. Jayasimha Babu & N.V. Balasubramanian, JJ.
Tax Case No. 468 of 1986
20th April, 1998
(1999) 239 ITR 435 (MAD) : (1999) 105 TAXMAN 346 (MAD)
Legislation referred to
Sections 201(1A), 37,
Case pertains to
Asst. Year 1981-82
Decision in favour of
Revenue

Business expenditure—Interest paid on agricultural loans—Interest under s. 201(1A)— Interest paid for period of delay takes colour from the nature of principal amount required to be paid but not paid within time—Principal amount here would be income-tax and interest is payable for failure to pay the tax deducted at source—The fact that income-tax required to be remitted was not income-tax payable by assessee but on behalf of another does not in any manner after the character of payment—Income-tax is not allowable as business expenditure—Amount not deducted and remitted has the character of tax—Therefore, interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction.

Conclusion
Interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source.