Whether the question of correctness of the decision and whether the same is to be followed in subsequent years are two different issues and therefore, cannot be clubbed to arrive at a reasonable conclusion. In the decision of Madras High Court reported above, it was held that the interest assumed the character of principle and therefore, it becomes incometax and cannot be allowed. If this proposition is accepted, then regular TDS deducted is also to be characterised as incometax as per Court ruling and therefore, it is not allowable. But it is allowed as business expenditure. For Example if 1,00,000 is to be paid as professional charges, then Rs. 90,000/- will be paid to the deductee and the remaining Rs. 10,000/- will be paid to the government in the form of TDS. Then this amount of Rs. 10,000/-, if it is considered as incometax, as held by the High Court , is not at all allowable. But it is allowed in all the cases and the immediate question that requires answer is under which section. Definitely u/s 37(1). Therefore, it cannot assumes the character of incometax by any stretch of imagination and what answer will we find to the above fallacy if we support the court decision. It is the amount to be paid to the deductee and it was paid to the government on his behalf. Therefore, it becomes the expenditure under the same head. Further, if we go through the court decision also, its argument is also in one way and final conclusion is in other way. Further, the interest u/s 201(1A) is also not a penalty as there is one more section in Incomtax Act which prescribes for penalty i.e. 271C. As per General Clauses Act, there cannot be two penalties for one default. If the interest is characterised as penalty then the second penalty u/s 271C cannot be called as penalty. Therefore, the conclusion is interest u/s 201(1A) is not penalty and the actual penalty is u/s 271C and this penalty cannot be allowed. Further it cannot be characterized as income tax as discussed above. When the answer to the above two propositions is negative, there is no other section prescribed for disallowance. Just because the decision of an High Court is not assailed by a particular assessee, it cannot become law of the land. It is true if revenue has not contested an issue declared by a High Court before Supreme Court, then it has no right to contest the same issue before Supreme Court in other's case as per sec. 268A unless the first decision is not contested because of the monetary limits. But assessees are always free to contest incorrect decisions before Higher Appellate forums. As stated in the beginning itself until and unless supreme Court decision comes, the revenue will follow Madras High Court decision which is in their favour because it is beneficial to them. Can we now also say it is no more open just because that decision is not contested before Supreme Court by a particular assessee. Every body knows that litigation has become very costly and therefore, the assessee in that case might have taken a decision not to contest the same before Apex Court or there might be 101 reasons for not contesting the said decision. I, personally, feel the question is still open as many ITATs in recent times have held that interest u/s 201(1A) is compensatory in nature. Any other view against this is welcome.....................