COROMANDEL AGRICO PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE- 5(2), NEW DELHI

(PAN : AABCC6812A) (APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Shri Sumit Kumar Verma, Sr. DR Date of Hearing : 20.09.2022 Date of Order : 22.09.2022 ORDER

PER SHAMIM YAHYA, ACCOUNTANT MEMBER :

“1. That the order of the Learned Commissioner of Income- tax (Appeals) is against facts and law. 2. That the Learned Commissioner of Income-tax (Appeals)is not justified in confirming the disallowance of Rs.2,42,856/- being interest paid on delayed deposit of TDS.

“On perusal of the balance sheet, Profit & Loss a/c and tax audit report. it was seen that the assessee has not added back the interest paid on late deposit of TDS u/s 206(C)(7). The assessee was asked explain this vide order sheet entry dated 24.11.2016 as per the submission of AR dated 03.12.2016. it was seen that the assessee has paid an interest or Rs.2,42,856/- u/s 206(C)(7) and not added back to his income. Therefore, this amount is disallowed and added back to the total income or the assessee. Penalty proceedings u/s 271 (1)(c) are being initiated separately for furnishing inaccurate particulars or income.”

i) CIT v Ahmedabad Cotton Mfg. Co. Ltd..[ 1995] 205 ITR 163 (SC) "Therefore, what needs to be done by an assessing authority under the Income-tax Act, 1961, in examining the claim of an assessee that the payment made by such assessee was a deductible expenditure under section 37 of the Income-tax Act although called a penalty is to see whether the law or scheme under which the amount was paid required such payment to be made, as penalty or as something akin to penalty, that is imposed by way of punishment for breach or infraction of the law or the statutory scheme. If the amount so paid is found to be not a penalty or something akin to penalty due to the fact that the amount paid by the assessee was in exercise of the option conferred upon him under the very law or scheme concerned, then one has to regard such payment as business expenditure of the assessee, allowable ./2017 under section 37 of the Income-tax Act, as n incident of business laid out and expended wholly and, exclusively for the purposes of the business. However, such payment of the assessee is one which is made in exercise of the option given to such assessee by the law or the statutory scheme and there arises no need for the assessing authority to go into the question whether the payment could not regarded as once made as a measure of business expediency, for it cannot ignore the fact that the law or the statutory scheme enables incurring of such expenditure in the course of the assessee's business. ii) ITO v Virtue Financial Service P. Ltd. [2012] 19 ITR (Trib.) 57 (Delhi)

On due consideration of the record, we are of the view that payments made by the assessee on account of delay in submitting certain statutory returns are compensatory in nature and not on account of fraction of any law. There are not penal in nature. Therefore, the learned Commissioner of Income-tax (Appeals) has rightly deleted the addition. iii) Kind attention is invited to the judgment of Delhi Bench "SMC-1 ", New Delhi wherein the same issue of allow ability of interest paid on late deposit of statutory dues had come up. The finding has been recorded in Para (5) which is as under:-

"(5) Having gone through the above cited decisions I find that the issue raised is supported with the above decisions. In the case of ITO vs Virtue Financial Service P. Ltd. (supra) the Tribunal on due consideration of the record has held that the payment made by the assessee on account of delay in submitting certain statutory returns is compensatory in nature and not on account of fraction of any law. They are not penal in nature. Therefore, the Ld. Commissioner of Income-tax (Appeals) has rightly deleted the addition hold the ITAT. IN the present case the interest in question was paid by the assessee to service tax department for delay in deposit of service tax. Thus the delay in deposit has been compensated with payment of the interest of Rs.2,43,671/-, hence the same cannot be termed as penal in nature due to violation of any provision of law. I thus hold that the interest payment of Rs.2,43,671/- due to delay in deposit of service tax is not penal in nature to justify the disallowance made and upheld by the authorities below. The same are set aside with the direction to the Assessing Officer to delete the disallowance. The objection is accordingly allowed. iv) Kind attention is invited to the judgment of S A Builders Limited v CIT (A) [2007] 288 ITR 1 (SC) wherein while considering the case of Delhi High Court in CITv Dalmia Cement (B) Limited [2002J 254 IJR 377 held as under:-

"The Revenue cannot justifiable claim to put itself in the arm chair of business man or in the position of Board of Directors to assume the role to decide how much is reasonable expenditure having regards to the circumstances of the case. No business man can be compelled to maximize his profit. The Income-tax authority must not put themselves in the shoes of the assessee and see how a prudent businessman would act. The authority must not look at the matter from their own view point but that of a prudent business man."

“[Explanation l.]-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.”