• PF, PT, ESIC, etc.

Dear Sir/Madam,
Kindly address our below mentioned query :
• Whether TDS Return Late fee, GST Tax Late fee, Profession Tax Late fee etc will be an allowable expenditure as per Income Tax Law, also provide the relevant basis/provision for the same.
• Whether Interest paid on TDS Return, GST, Profession Tax etc. will be an allowable expenditure as per Income Tax Law, also provide the relevant basis/provision for the same.
• If the assessee fails to deposit the PF, ESIC etc Contribution (Both i.e Employee’s contribution & Employer’s contribution) before the due dates as per the respective Acts but the same has been paid to the Govt. upto the Due date of filing income tax returns u/s 139(1) then it will be allowed as deduction as per Income Tax Law, also provide the relevant basis/provision for the same.
Kindly guide on this with relevant reason/with the provision….
Asked 4 years ago in Income Tax

It is still a point of litigation, however based on various case laws we can draw a conclusion that such late fees is not a expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law.

Hence it will be allowed as expense.

Same goes for interest.

Yes it will be allowed you can refer the case of Rajasthan State beverages case law 250 taxman 0016.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Dear Sir,

Hope you are doing well !!

As decided in many case laws, it will be an allowable expenditures subject to litigation.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hello,

 

Deduction for Late Fees won't be allowed. Subject to litigation.

Deduction for Interest on delayed payment of tax will be allowed. Various case laws in favour of the assessee.

Deduction for PF, ESIC up to the due date of ITR u/s. 139(1) would be allowed.

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

Hi,

 

Please refer to our replies in line below:

1). All three expenses are allowable as per section 37 of the Income-tax Act, 1961 since all these expenditures are compensatory in nature.

2).- Interest paid on TDS is not allowed as per section 40a(ii) of the Act.

     - Interest paid under GST and professional tax are allowable expenditure since they are compensatory in nature and not in nature penalty.

     - Moreover, Penalty for infraction of any law is not allowed except penalty paid for breach of contract.

 

3).As per section 36(1)(va) of the Act, in order to claim deduction of employee's contribution received towards relevant funds, employer shall deposit the same before the due date specified in the respective funds.


However, one may claim deduction of the same even it is deposited before the due date of filing of ITR. Reliance in this regard can placed on Delhi High Court ruling in the case of AIMIL and Supreme Court in case of Vinay Cement.
Further, the above matter is highly disputed.

Damini Agarwal
CA, Bangalore
405 Answers
31 Consultations

5.0 on 5.0

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