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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-11, Chennai in dated 25.10.2017 for assessment year 2013-14.
M/s. Taqa Neyveli Power Company Pvt Ltd., the assessee is a 250 MW lignite based power generating company at Neyveli. While making the assessment for assessment year 2013-14, the Assessing Officer noticed that the assessee has incurred an interest expenditure of Rs. 3316,375/- towards delayed payment of Excise duty. He disallowed it holding that it is not an allowable expenditure. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) allowed the appeal on this issue.
Aggrieved, the Revenue filed this appeal with the following grounds:
“1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2.1 The Ld. CIT(A) erred in deleting the disallowance of interest on delayed payment of excise duty even though the same is penal in nature and hence not allowable expenditure u/s 37(1). 2.2 The Ld. CIT(A) ought to have seen that the relied decision of the Hon’ble Apex Court in the case of Lachmandas Mathurdas reported in 254 ITR 799 is relating to the interest on delayed payment of sale tax and hence no applicable to the facts of the case in hand. 2.3 The learned CIT(A) ought to have followed the decision of the Apex Court in the case of Hon’ble Supreme Court in the case of M/s. Bharat Commerce Industries Limited (153 ITR 275) wherein the Apex Court held that any interest payable for default committed by the assessee in discharging his statutory liability is not allowable expenditure.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT (A) may be set aside and that of the Assessing Officer be restored.”
The Ld. DR presented the case on the lines of the grounds of appeal, supra. Per contra, the Ld. AR inviting our attention to the order of the Ld. CIT(A) submitted that the Ld. CIT(A) after perusing the Central Excise Tax Act, 1994, he has noticed that there are two sections vis., Section 11AA which charges interest on delayed payment of duty and Section 11AC which charges penalty for short levy or non-levy of duty. As per these provisions, it is clear that the delayed payment of excise duty attracts interest whereas the failure to pay excise duty attracts penalty. Therefore, the Ld. CIT(A) held that levy of penalty would fall under Explanation to Section 37 of the Act but not interest.
Interest on the delayed payment of excise duty is compensatory in nature and would not fall under Explanation to Section 37 of the Act. The Supreme Court in the case of Lachmandas Mathuradas held that interest on arrears of tax is compensatory in nature and not penal. In view of the above, interest on delayed payment of excise duty is held to be compensatory in nature and therefore an allowable expenditure.
4.1 Further, the Ld. AR submitted that the decision relied on by the Revenue viz., 153 ITR 275 is not rendered by the Apex Court as is pleaded by the Revenue, but it was rendered by the Delhi High Court and it is in connection with the issue of interest levied for failure to pay advance tax under the Income Tax Act. The issue, in the assessee’s case is in connection with indirect tax. The Ld. AR further submitted that the Jurisdictional High Court in the case of CIT vs India Pistons Ltd., 250 ITR 279 (Mad) held that the interest paid for delayed payments of custom duty is allowable and hence pleaded that the order passed by the Ld. CIT(A) may be upheld.
We considered the rival submissions and find merit in the submissions of the Ld. AR. It is clear from the orders of the lower authorities that the impugned interest was not in connection with infraction of law, if any. The ratio relied on by the Revenue is not applicable to the facts of this case. The Excise duty is an indirect tax, payable by the assessee in the course of its business and is admissible as business expenditure. The interest on the late payment of Excise duty, incurred by the assessee has to be regarded as compensatory in nature and hence, allowable as business expenditure.
Following, the ratio of the jurisdictional High Court, the Revenue’s appeal is dismissed.
In the result, the Revenue’s appeal is dismissed.
Order pronounced in the Open Court on 26th June, 2018 at Chennai.