CA Manish (Practice) (87 Points)
21 February 2011CAN ANYONE PLEASE LET ME KNOW WHETHER INTEREST ON DELAYED PAYMENT
OF VAT/CST is allowable expenditure under the Income Tax Act, 1961.
Kindly let me know the same for penalty levied under any other law allowable or not.
MD.Taufique
(CA,CS)
(308 Points)
Replied 21 February 2011
Friend penalty for delayed payment of tax and penalty levied under any other law is disallowable expenditure under income tax
Karan Teli
(Life Is just an Illusion...!!)
(4573 Points)
Replied 22 February 2011
penality are levied for not follwoing some rules and such exp incurred for delayed payment is not allowed as deduction under act......
CA.Naveen Kailkhuri
(CA)
(38 Points)
Replied 21 March 2011
Hi,
Please refer to Sec. 40(a)(ii) of IT Act, wherein it is specified that any Interest / Penalty / Fine etc for non payment or late payment of Income Tax is not deductible. This principle equally applies on the late payment of CST / VAT. Hence, the INTEREST ON DELAYED PAYMENTOF VAT/CST is not allowed under IT Act.
Further, refer to Section 37 of the ITAct, specifies any expense as allowable only if "Not incurred for any purpose which is any offence or Prohibition by ANY Law".
Here, the term ANY is of great significance and hence applies to "CST / VAT" as well.
Now, the "Interest" in your case specifies that it is paid for something which is against provisions of Section 37.
Hence, the said interest will not be allowed as deduction for calculating Business Income.
regards
CAclubindia
