The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest on income tax cannot be allowable as deduction under section 40(a)(ii) of the Income Tax Act, 1961.
The assessee, Rajendra Sukhdev Mirgane, is a Builder and Contractor, who filed the return of income declaring total income at Rs.2.18 crore. During the course of assessmentproceedings, the Assessing Officer (AO) observed that the assessee had debited Rs.61,96,457/- and Rs.84,05,606/- towards payment made to sub-contractor, Shri S.N. Ubale in respect of the Koradi LBC work/Koradi RBC work. Since the assessee could not furnish necessary details in respect of the said payments, the AO made disallowance for such sum. During the course of proceedings before the CIT(A), the assessee furnished additional evidence to prove the genuineness of the claim of expenditure.While passing the order, the Assessing Officer also disallowedthe interest expenditure of Rs.3,13,414/- paid on delayed payment of TDS.
Shri R.S. Syal, Vice President and Shri ParthaSarathi Chaudhury, Judicial Member held that the assessee was required to deduct and pay tax at source.
“There was delay in making the payment of tax, which led to the charging of interest by the Income-tax Department to the tune of Rs.3,13,414/-. In our considered opinion, neither the amount of income-tax nor interest on income-tax can be allowed as deduction, which is strictly prohibited in terms of section 40(a)(ii) of the Act. We, therefore, uphold the impugned order on this score,” the Tribunal said.
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