The Pune bench of the Income Tax Appellate Tribunal (ITAT), the interest on income tax cannot be permissible as a deduction under section 40(a)(ii) of the Income Tax Act, 1961.
The taxpayer, Rajendra Sukhdev Mirgane, is a Builder and Contractor who filed the income return showing a total income of Rs 2.18 cr. At that time of assessment proceedings, the Assessing Officer (AO) sees that the taxpayer had debited Rs.61,96,457 and Rs.84,05,606 for the payment incurred to the sub-contractor, Shri S.N. Ubale in respect of the Koradi LBC work/Koradi RBC work.
As the taxpayer cannot file the needed information for the mentioned payments, the AO incurred the disallowance for the same sum. In the proceedings to CIT(A), the taxpayer filed further proof for proving the reality of the claim of the expenditure. During issuing the order, the Assessing Officer disallowed the interest expenditure of Rs.3,13,414/- filed on late TDS payment.
Shri R.S. Syal, Vice President, and Shri ParthaSarathi Chaudhury, Judicial Member ruled that the taxpayer needed to deduct and pay tax at source.
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“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 mentioned.
