ASIANET SATELLITE COMMUNICATIONS LIMITED,THIRUVANANTHAPURAM V. ASSISTANT COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM

ITA 473/COCH/2025

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The case involves Asianet Satellite Communications Ltd., which appealed against the order of the Assistant Commissioner of Income Tax regarding the disallowance of interest paid on delayed payments of TDS, service tax, and entertainment tax. The initial assessment for AY 2016-17 declared nil income after setting off brought forward unabsorbed depreciation. However, upon review, the Principal Commissioner of Income Tax found the assessment order to be erroneous and prejudicial to the interests of the Revenue, leading to a revised assessment. The Tribunal had to determine whether the interest paid for delayed remittance of statutory dues is a business expenditure or a penalty. The Tribunal concluded that such interest is compensatory and not a penalty, thus it is allowable as a business expenditure.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714150 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: Martin & Harris (P.) Ltd. vs. CIT, Chennai Properties & Investment Ltd. vs. CIT, Mahalakshmi Sugar Mills Co. vs. CIT, Kaypee Mechanical India (P.) Ltd. vs. CIT, PTL Enterprises Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: RAGHUNATHAN S; WAY OF DAMAGES; PENALTY OR INTEREST
• Keywords: Set aside; Business income; Business expenditure; Depreciation; TDS; Unabsorbed depreciation
• Section: 143(3); 263; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SOUNDARARAJAN K, JM ITA Nos. 473/Coch/2025 Assessment Year : 2016-17 Asianet Satellite Communications Ltd. .......... Appellant 2A, 2nd Floor, Technopark Campus, Kariyavattom, Trivandrum, Kerala - 695581 [PAN: AAECA 5548 E] vs. Asst. Commissioner of Income Tax .......... Respondent Circle-1(1), Thiruvananthapuram. Appellant by: Shri Raghunathan S, Advocate Respondent by: Smt. Leena Lal, Sr. DR Date of Hearing: 04.08.2025 Date of Pronouncement: 08.08.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 21.04.2025 u/s. 250 of the Income Tax Act, 1961 (for short, 'the Act') for Assessment Year (AY) 2016-17. 2. Brief facts of the case are that appellant is a company, incorporated under the Companies Act, 1956. It is engaged in the business of service providing digital cable TV and broadband internet services. The return of income for the A.Y. 2016-17 was filed on 13/10/2016 declaring nil income after adjustment of brought Printed from counselvise.com 2 ITA Nos. 473/Coch/2025 Asianet Satellite Communications Ltd. forward unabsorbed depreciation. Against the said return of income, the assessment was completed by the Assessing Officer (AO) vide order dated 24/12/2018 passed u/s. 143(3) of the Act at nil income after setting off of brought forward unabsorbed depreciation. Subsequently, on review of assessment order, learned PCIT, Trivandrum (PCIT) found that assessment order is erroneous and prejudicial to the interests of Revenue as the AO had failed to examine the issue of allowability of interest paid on delayed payment of service tax/VAT/TDS etc. and set aside the assessment order to the file of AO for redoing the assessment. 3. Being aggrieved by the order of revision, appellant filed an appeal filed before this Tribunal and this Tribunal confirmed the revisionary order. The AO passed the consequential order to the order passed u/s. 263 vide order dated 18/12/2023 u/s. 143(3) r.w.s. 263 of the Act at a total income of Rs. 21,85,99,699/- before set off of brought forward unabsorbed depreciation loss. While doing so, the AO made disallowance of Rs. 1,07,06,000/- being the amount of interest on delayed payment of TDS of Rs. 79,69,894/-, service tax of Rs. 8,49,279/- and entertainment tax of Rs. 3,186/- rejecting the contention of the appellant that the same partakes character of business expenditure placing reliance on the decision of Hon'ble Calcutta High Court in the case of Martin & Harris (P.) Ltd. (1993) 73 taxman 555 (Cal.) and Hon'ble Madras High Court in the case of CIT vs. Chennai Properties & Investment Ltd. (1999) 239 ITR 435 (Mad.). Printed from counselvise.com 3 ITA Nos. 473/Coch/2025 Asianet Satellite Communications Ltd. 4. Being aggrieved, assessee filed an appeal before the learned CIT(A), who vide confirmed the action of the AO. 5. Being aggrieved by the order of learned CIT(A), the assessee is in appeal before this Tribunal in the present appeal. 6. It is contended that payment of interest under the provisions of respective statutes, is a compensatory in nature, does not form part of penalty paid for infraction of law and, therefore is allowable deduction placing reliance on the decision of Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT (1980) 123 ITR 429 (SC) and also the decision of Hon'ble Gujarat High Court in the case of CIT vs. Kaypee Mechanical India (P.) Ltd. [2014] 45 taxmann.com 363 (Guj.) and also placing plethora of other decisions. 7. On the other hand, ld. Sr. DR submits that the orders passed by the lower authorities are inconsonance with the law laid down by the Hon'ble Calcutta & Madras High Courts and therefore no interference is called for. 8. We have heard rival submissions and perused the material on record. The issue that arises for our consideration is whether interest paid for belated remittance of entertainment tax, service tax, TDS under the provisions of income tax, would partake character of business expenditure or not. The Hon'ble Supreme Court in Mahalakshmi Sugar Mills (supra) held that whenever any statutory impost is paid by an assessee by way of damages, penalty or interest Printed from counselvise.com 4 ITA Nos. 473/Coch/2025 Asianet Satellite Communications Ltd. claimed is allowable u/s. 37(1) of the Act, if impost, is found to be in compensatory in nature, the same is allowable deduction. The submission of the appellant that interest is paid for belated remittance of the statutory dues remains uncontroverted by the learned DR and the interest is nothing but a compensatory in nature and, therefore, the same is allowable as deduction as held by Hon'ble Kerala High Court in the case of PTL Enterprises Ltd. vs. DCIT (2022) 443 ITR 260 and the SLP on the said judgment was dismissed by the Hon'ble Supreme Court in 137 taxmann.com 412. In view of the biding judgments of the Hon'ble Jurisdictional High Court, we are of the considered opinion that the amount paid is not in the nature of penalty and therefore, the same would partakes the character of business expenditure, allowable as deduction while computing the business income. Therefore, we direct the AO to delete the addition of Rs. 1,07,06,000/-. Accordingly, the grounds of appeal filed by the assessee stands allowed. 9. In the result, appeal filed by the assessee stands allowed. Order pronounced on 08th August, 2025 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (SOUNDARARAJAN K) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 08th August, 2025 vr/- Printed from counselvise.com 5 ITA Nos. 473/Coch/2025 Asianet Satellite Communications Ltd. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin Printed from counselvise.com "