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May 2023

Interest on delayed payment of TDS is compensatory in nature and is allowable as deduction under section 37(1) of the Act.

By Jagdish Punjabi
Chartered Accountant
Devendra Jain
Advocate
Reading Time 3 mins
4. Delhi Cargo Service Centre vs. ACIT 2023 Taxscan (ITAT) 778 (Delhi - Trib.) A.Y.: 2015-16 Date of order: 24th March, 2023 Sections: 37, 43B Interest on delayed payment of TDS is compensatory in nature and is allowable as deduction under section 37(1) of the Act. FACTS The assessee, a company engaged in cargo handling services at Cargo Terminal – 2, Indira Gandhi International Airport, e-filed its return of income for A.Y. 2015-16 declaring therein a loss of Rs. 13,29,41,858. The AO passed a draft assessment order on 18th December, 2018 under section 143(3) r.w.s. 92C of the Act inter alia proposing an addition of Rs. 1,28,605 under section 43B being late payment towards statutory dues. Aggrieved, the assessee preferred an application under section 144C(2) before the Dispute Resolution Panel (DRP) objecting to the additions proposed by the AO. Regarding disallowance of Rs.1,28,605 under section 43B, the DRP directed the Ld. AO to examine the evidence and allow to the extent supported by the evidence. The Ld. AO, however maintained the disallowance of interest of Rs. 94,662 paid on late payment of TDS and Rs.26,465 being PF arrear payments as challans in support were not filed. The AO held that the entire amount pertained to A.Y. other than A.Y. 2015-16 and thus cannot be allowed. Liability for interest being in
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