05 June 2013
Company has paid vat liability for the previous year 2008-09 Rs.554000/- + Interest Rs.65000/- on 25.05.2012. Whether same is allowable expenses under it act.
07 June 2013
Interest is allowable expense as per section 37(1) read with sec 43B of the Income Tax Act.
A decision of the Supreme Court in Lachmandas Mathuradas vs CIT 254 ITR 799 (SC) reiterated that interest on arrears of sales-tax or outstanding balance of sales tax is not penal but is compensatory in nature and an allowable tax deduction.
Also refer to http://taxguru.in/income-tax-case-laws/prior-period-expenses-allowable.html.
CAclubindia
