DEEPAK KUMAR SAHOO,KENDUJHAR vs. ACIT, CIRCLE ROURKELA, UDIT NAGAR ROURKELA

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ITA 17/CTK/2026Status: DisposedITAT Cuttack13 May 2026AY 2021-223 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest on TDS and GST is compensatory, not penal, and thus not disallowable under Section 37(1). The disallowance of custom duty was upheld as the assessee accepted it.

What were the facts?

The assessee appealed against the CIT(A)'s order confirming additions related to disallowance of interest on TDS and GST, and custom duty. The assessee did not challenge the disallowance of custom duty.

What were the issues?

Whether interest paid on TDS and GST is compensatory or penal in nature, and thus allowable as an expenditure. Whether the disallowance of custom duty is to be upheld.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “CUTTACK BENCH, CUTTACK

Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR

For Appellant: Shri P. K. Mishra & B. N. Behera, ARs
For Respondent: Shri Vijay Singh, Sr. DR
Hearing: 13.05.2026Pronounced: 13.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “CUTTACK BENCH, CUTTACK VIRTUAL HEARING AT KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.17/CTK/2026 Assessment Year: 2021-22 Deepak Kumar Sahoo ACIT, CIRCLE, ROURKELA

Block-A, 2nd Floor, Plot 102 and 258 DD College Road, Vs Pabitradiha Kamargadia, U.No.14, Keonjhar, Odisha- 758001. (PAN: BNHPS1458R) (Appellant) (Respondent)

Assessee by : Shri P. K. Mishra & B. N. Behera, ARs Revenue by : Shri Vijay Singh, Sr. DR Date of Hearing : 13.05.2026 Date of Pronouncement : 13.05.2026

ORDER PER BENCH: This is an appeal filed by the assessee against the order of the NFAC, Delhi [hereinafter referred to as the ‘CIT(A)’] in appeal no.NFAC/2020-21/10203088 dated 13.11.2025 for the assessment year 2021-22. 2. Shri P. K. Mishra & B. N. Behera, ARs, represented on behalf of the assessee and Shri Vijay Singh, Sr DR represented on behalf of the revenue. 3. It was submitted by the ld. AR that the only issue in the appeal of the assessee is against the action of the ld. CIT(A) in confirming the

ITA No.17/CTK/2026

addition of Rs. 1,42,65,302/- representing the disallowance of Rs.28,93,006/- being interest on TDS and an amount of Rs.56,08,912/- representing interest on GST and an amount of Rs.57,63,384/- representing custom duty. It was the submission that the assessee is not challenging the disallowance of custom duty. The assessee is challenging only in regard to disallowances of expenditure representing interest on TDS and interest on GST. It was the submission that interest on TDS and interest on GST were not penal in nature but were in the nature of compensation in view of decision of Hon’ble Supreme Court in the case of Lachmandas Mathuradas vs. CIT reported in 254 ITR 799 (SC) and the same is liable to be allowed. It was the submission that the additions should be deleted.

4.

In reply, the ld. Sr. DR vehemently supported the orders of the Assessing Officer and ld. CIT(A).

5.

We have heard the rival submissions. A perusal of the decision of Hon’ble Supreme Court in the case of Lachmandas Mathuradas vs. CIT referred to supra shows that the Hon’ble Supreme Court has held that interest on arrears of tax is compensatory in nature and not penal. As the Hon’ble Supreme Court has already held that the interest on arrears on tax is compentory in nature and not penal in nature, the same cannot be disallowed invoking provisions of section 37(1) of the Act. This being so and respectfully following the principles laid down by the Hon’ble Supreme Court in the case of Lachmandas Mathuradas vs. CIT referred 2

ITA No.17/CTK/2026

to supra, the addition as made by the Assessing Officer and confirmed by the ld. CIT(A) in respect of interest on TDS and interest on GST stand deleted and these grounds of the assessee are allowed. In regard to issue of disallowance of custom duty, as the assessee has accepted the disallowance, the said ground in relation to custom duty stands dismissed.

6.

In the result, the appeal of the assessee is partly allowed.

Kolkata, the 13th May, 2026.

Sd/- Sd/- [Rajesh Kumar] [George Mathan] लेखा सदस्य/Accountant Member न्याययक सदस्य/Judicial Member

Dated: 13.05.2026. RS Copy of the order forwarded to: 1. Appellant - 2. Respondent – 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar

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