INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Interest under sections 234B, 234C and 234D, whether compensatory in nature - Allowability -

Pursuant to the assessment for relevant assessment years, the resultant demand was paid by assessee. The demand included interest under sections 234B, 234C and 234D, which was paid by assessee and claimed as business expenditure. AO disallowed the same in terms of section 40(a)(ii) alleging that interest on tax was not allowable deduction under section 37 as it was the part of tax itself and the payment of tax and interest thereon was the personal liability of assessee.Held: The payment of income tax is personal liability for the assessee and consequential interest paid thereupon for delay is part and parcel of the aforesaid payment only and retain the same color and character. The interest paid by assessee under protest, was nothing but the money kept in trust before revenue and the expenditure in that respect could not be said to have even crystallized during impugned assessment year and therefore, there could be no occasion to consider the question that whether the same was an admissible expenditure during relevant assessment year. Viewing from any angle, the deduction of this expenditure either under section 37(1) or 36(1)(iii) could not be allowed to the assessee.

REFERRED : CIT v. Anjum MH Ghaswala & Ors. (2001) 252 ITR 1 (SC) : 2001 TaxPub(DT) 1637 (SC), Harshad Shantilal Mehta v. Custodian & Ors. (1998) 231 ITR 871 (SC) : 1998 TaxPub(DT) 1326 (SC), Raju Bhojwani v. Ch. CIT (2011) 13 Taxman 221 (Del) : 2012 TaxPub(DT) 0098 (Del-HC), CIT v. Anand Prakash (2009) 316 ITR 141 (Del) : 2009 TaxPub(DT) 1506 (Del-HC), CIT v. Manoj Kumar Beriwal (2008) 217 CTR 407 (Bom) : 2009 TaxPub(DT) 0595 (Bom-HC), CIT v. Kotak Mahindra Finance Ltd. (2004) 265 ITR 119 (Bom) : 2004 TaxPub(DT) 0615 (Bom-HC) and Dy. CIT v. Stup Consultants (P) Ltd. 2012 TaxPub(DT) 1829 (Mum-Trib).

FAVOUR : Against the assessee.

A.Y. :

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