TINNA RUBBER AND INFRASTRUCTURE LIMITED,DELHI V. DCIT CIRCLE-25(1), DELHI

ITA 1354/DEL/2025

AI Insights

The case involves Tinna Rubber and Infrastructure Ltd. appealing against the order of the Commissioner of Income Tax (Appeals), which sustained additions made by the CPC Bengaluru under Section 143(1) of the Income Tax Act, 1961 for the Assessment Year 2023-24. The primary issues were the deductibility of interest paid on late deposits of PF/ESI and fees for late filing of a bill of entry, both of which the CIT(A) had treated as penalties. The Tribunal, referencing decisions from other benches and higher courts, ruled that these payments were compensatory in nature and thus deductible, except for the fine under the Customs Act, which was upheld as a penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839186 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2023-2024
• Appeal Filed On: 04-03-2025
• Other Referred Cases: M/s Manglam Arts Govind Nagar (East) vs. Pr. CIT(A) for A.Y. 2018-19, CIT vs Mysore Electrical Industries Ltd., Mahalakshmi Sugar Mills Co. vs CIT, CIT vs Mandya National Paper Mills Ltd., CIT v. Hoshiari Lal Kewal Krishan
• Laws Referred To: Income Tax Act, 1961, Employees Provident Funds and Miscellaneous Provisions Act, 1952, Customs Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: SHIVAM GUPTA; VIRTUAL; RAJAT JAIN
• Keywords: Business expenditure
• Section: 37; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, C: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.- 1354/Del/2025 [Assessment Year: 2023-24] Tinna Rubber and Infrastructure Ltd., No. 6, Sultanpur, Mehrauli, South- West, Delhi-110030. Vs DCIT, Circle-25(1), C.R. Building, Delhi. PAN- AAACT3586D Assessee Revenue Assessee by Shri Shivam Gupta, CA (virtual) & Shri Rajat Jain, CA Revenue by Shri Om Prakash, Sr. DR Date of Hearing 21.01.2026 Date of Pronouncement 18.02.2026 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the Assessee is directed against the order dated 06.01.2025 of ld. Commissioner of Income Tax, Appeal, ADDL/JCIT(A)-1, Vadodara [hereinafter referred to as the ‘Ld. CIT(A)] order arising out of the order dated 28.05.2024 passed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) passed by the CPC Bengaluru, pertaining to Assessment Year (AY) 2023-24. Printed from counselvise.com ITA No.-1354/Del/2025 Tinna Rubber and Infrastructure Ltd. 2 2. Ground no. 1 of the appeal is general in nature, and no specific submissions were made in this regard. Hence, this ground of appeal is dismissed. 3. Ground no. 2 of the appeal is reproduced as under: “ That the Ld. CIT(A) has erred in law in sustaining addition of Rs. 16,454/- made on account of Interest paid on late deposit of contribution to PF and ESI. 4. The Ld. CIT(A) did not allow the claim of the assessee on the ground that the interest paid on late deposits of statutory dues such as PF / ESI was not a regular business expenses but was a penalty for delayed payment. 5. Before us, the Ld. AR relied upon the order of the Jaipur Bench of the Tribunal in ITA No. 239/JP/2023 in the case of M/s Manglam Arts Govind Nagar (East) vs. Pr. CIT(A) for A.Y. 2018-19 in support of its claim. The relevant extract of the said order is reproduced as under: “4.4 After hearing both the parties and perusing the materials available on record, it is noted that the Id. PCIT proposed disallowance on account of fine & penalty of Rs.46,666/-.However, we find that out of it Rs.38,809/- paid towards interest on late deposit of PF is covered in favour of the assessee in view of the decision of Hon'ble Karnataka High Court in the case of CIT vs Mysore Electrical Industries Ltd. 196 ITR 884 wherein relevant observation of the Hon'ble Karnataka High Court is as under:- \"The assessee failed to pay the contribution under the provisions of the Employee's Provident Funds Act to the concerned trust. Consequently, the company had to pay interest thereon u/s 7-Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. This interest was claimed by the assessee u/s 37 of the Income Tax Act, 1961. The Income Tax Officer rejected the claim but the Tribunal allowed it. On a reference:- Held, that the interest was compensatory in nature and not a penalty. Hence, it was deductible Printed from counselvise.com ITA No.-1354/Del/2025 Tinna Rubber and Infrastructure Ltd. 3 Mahalakshmi Sugar Mills Co. vs CIT [1990] 123 ITR 429 (SC) applied. (Kar). CIT vs Mandya National Paper Mills Ltd. [1984] 150 ITR 26 Consequently, we are of the view that the questions referred to us are to be answered in the affirmative and against the Revenue. Reference is answered accordingly.\" Further, it is noted that payments towards late fees for filing TCS/ GST Return is not an offence prohibited by law. For the above reasons, the ground no. 3 of the assessee is allowed.” (emphasis supplied by us) 5.1 The Ld. Sr. DR supported the orders of the authorities below. 6. We have heard both the parties and perused the material available on records. 6.1 Respectfully following the order of the Jaipur Bench, we hold that the interest payment of Rs. 16,454/- on late deposit of PF /ESI was compensatory in nature and accordingly, we, delete the addition of Rs. 16,454/-. Ground no. 2 of the appeal is allowed. 7. Ground nos. 3 and 4 of the appeal are reproduced as under: “ 3. That the Ld. CIT(A) has erred in law in sustaining addition of Rs. 4,32,163/- made on account of Fees paid for late filing of bill of entry. 4. That the Ld. CIT(A) has erred in law in sustaining addition of Rs. 25,000/- made on account of Fine paid under Customs Act.” 7.1 In Ground No. 3, the assessee has contested the addition of Rs.4,32, 163/- under section 37 of the Act on account of fees paid for late filing of bill of entry and Printed from counselvise.com ITA No.-1354/Del/2025 Tinna Rubber and Infrastructure Ltd. 4 in Ground No. 4, the assessee has raised the issue of making addition of Rs.25,000/- under section 37 of the Act on account of fine paid under Customs Act. 7.2 The Ld. CIT(A) did not allow the above claims of assessee by holding that the said payment of Rs. 4,32,163/-, on account of fees paid for the late filing of the bill of entry and Rs. 25,000/- on account of fine paid under Customs Act was not a deductible expense under Section 37(1) of the Income Tax Act, 1961 as the same represented a penalty or a charge for non-compliance with statutory requirements under the Customs Act. 6.3 The Ld. AR submitted before us that a similar disallowance of Rs. 4,83,097/- on account of fees paid for the late filing of the bill of entry was deleted by the Ld. CIT(A) for A.Y. 2018-19 and submitted that the disallowance of Rs. 4,32,163/- may be allowed as the same was compensatory in nature. The relevant extract of the said order of the Ld. CIT(A) is reproduced as under: “ 8.2.1 On perusal of the assessment order, it has been found that the appellant has paid penalty under custom duty amounting to Rs. 4,83,097/-. The assessing officer has made disallowance of same by stating that the stated expense has been incurred in violation of Custom Act, the same is an ineligible expense as per provisions of section 37 of the IT Act, 1961. As per the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Hoshiari Lal Kewal Krishan [2007] 160 Taxman 96 (Punjab & Haryana), wherein it has been held, which is as under: \"4.2 As regards judgment of the Hon'ble Supreme Court in Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350, the same is distinguishable, as therein, any amount paid which was in the nature of penalty for breach of law, was held not to be allowable as permissible deduction. The said case did not deal with a situation where though called penalty or fine, the payment was in effect intended to compensate the loss Printed from counselvise.com ITA No.-1354/Del/2025 Tinna Rubber and Infrastructure Ltd. 5 on account of delay in making the payment and was not by way of penalty for breach of law.\" Therefore, considering the facts of the case and following the above-mentioned decision, I am of the view that interest on late payment/deposit of sales tax & service tax or penalty/fine paid for late deposit of excise duty is treated as compensatory nature of expense and therefore, allowable under section 37(1) of the Act. Therefore, the assessing officer was not found to be justified in making the disallowance of Rs. 4,83,097/- and hence, the addition made by the assessing officer is directed to be deleted.” 6.4 The Ld. Sr. DR supported the orders of the authorities below. 6.5 We have heard both the parties and perused the material available on record. 6.6 In the present year also, the amount of Rs. 4,32,163/- has been paid as fees for the late filing of the bill of entry, which is compensatory in nature and not a penalty. Therefore, in view of the above order of the Jaipur Bench in the case of M/s Manglam Arts Govind Nagar (East) vs. Pr. CIT(A) (supra), we are of the considered view that this was an allowable expenditure. We, therefore, delete the said disallowance of Rs. 4,32,163/-. Regarding the disallowance of Rs. 25,000/- paid towards fine under Customs duties, the Ld. AR could not furnish any further details to show that it was not a penalty but was compensatory in nature. Therefore, this amount cannot be allowed, and we confirm the order of the Ld. CIT(A) on this issue. Accordingly, ground no. 3 is allowed and ground no. 4 is dismissed. 7. Ground no. 5 of the appeal has not been pressed by the assessee, hence, this ground is dismissed as not pressed. 8. In the result, appeal of the assessee is partly allowed. Printed from counselvise.com ITA No.-1354/Del/2025 Tinna Rubber and Infrastructure Ltd. 6 Order pronounced in the open court on 18th February, 2026. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 18.02.2026. Pooja. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, Printed from counselvise.com "