During assessment proceeding, AO noted from Tax Audit Report that assessee had paid a penalty which was not disallowed by it while computing income chargeable to income tax. Assessee submitted that such penalty was paid to avoid litigation with Sales Tax Department on an amount of tax for bogus purchases. AO held that such amount was a penalty levied by Sales Tax Department for violation of law committed by assessee which need to be disallowed u/s 37 and which also was certified by CA in tax audit report. AO completed assessment after making disallowance in this regard. CIT(A) allowed assesses claim. The tribunal held that  interest u/s 30(2) was compensatory in nature for delay in payment of  additional tax under MVAT computed from original due date of payment of the MVAT liability due to availment of wrong ITC, on alleged bogus purchases, till said additional tax liability of VAT was paid to the authorities. Whereas, levy of interest u/s 30(4) of MVAT Act had germane to detection of short payment of VAT by way of concealment or furnishing of inaccurate particulars of income in original return of VAT filed with MVAT Department due to infraction of law, which is detected after commencement of such special events such as audit, inspection, survey, search under MVAT Act. The AO was directed to bifurcate payments of interest made u/s 30(2) and 30(4) of MVAT Act, allowing only the compensatory interest u/s 30(2) of MVAT Act. Penal interest u/s 30(4) of MVAT Act was disallowed. Revenues appeal was partly allowed.    (AY. 2009-10 , 2012 -13)