Whether interest on TDS is allowable?

[pawansingla]

Whether interest on late payment of TDS is allowable expenditure u/s 37.Kindly reply with any case law if there is on the issue.

COMMISSIONER OF INCOME TAX vs. CHENNAI PROPERTIES & INVESTMENT LTD.
HIGH COURT OF MADRAS
R. Jayasimha Babu & N.V. Balasubramanian, JJ.
Tax Case No. 468 of 1986
20th April, 1998
(1999) 239 ITR 435 (MAD) : (1999) 105 TAXMAN 346 (MAD)
Legislation referred to
Sections 201(1A), 37,
Case pertains to
Asst. Year 1981-82
Decision in favour of
Revenue

Business expenditure—Interest paid on agricultural loans—Interest under s. 201(1A)— Interest paid for period of delay takes colour from the nature of principal amount required to be paid but not paid within time—Principal amount here would be income-tax and interest is payable for failure to pay the tax deducted at source—The fact that income-tax required to be remitted was not income-tax payable by assessee but on behalf of another does not in any manner after the character of payment—Income-tax is not allowable as business expenditure—Amount not deducted and remitted has the character of tax—Therefore, interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction.

Conclusion
Interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source

I was able to find this judgement which is against the assesse.

[JB]

The Bombay HC judgement reported at 196 ITR 406 and Calcutta HC judgment reported at 73 Taxman 555 also says that interest u/s 201(1A) is not deductible.

Pawanji, is there any development in the issue of deduction u/s 80IB(10) on on money receipt we discussed few months back? kindly give you inputs.

[pawansingla]

No Sir,. But i think we are on a strong footing.The assessee will be assessed next year.Further i was just advising my friend on the issue.