Provident fund

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SANIA

SANIA (Querist)
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02 July 2015 whether interest on late payment of pf and esi allowable or not

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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02 July 2015 Allowable.

Interest is compensatory in nature and hence allowable as business expenditure. Penalty is for contravention of the provisions of an act and,therefore, not allowable as a business expenditure. The Apex Court in 'Swadeshi Cotton Mills Co. Ltd., V. Commissioner of Income Tax' 2008 - Supreme Court was dealing with the question as to whether damages paid for delayed payment of employees contribution to employees' provident fund was compensatory or penal. The court following the judgment in 'Prakash Cotton Mills Ltd.,' - 2008 - Supreme Court remitted the matter to the High Court for reconsideration in the light of the observation made therein.