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| The Tax Publishers2020 TaxPub(DT) 3807 (Bang-Trib) INCOME TAX ACT, 1961
Section 37(1)
Interest payable to micro, small and medium enterprises was not allowable under section 37(1) in view of overriding provisions of MSMED Act.
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Business expenditure - Allowability - Interest payable to micro, small and medium enterprises -
Assessee claimed deduction of interest payable to micro, small and medium enterprises.AO disallowed deduction by invoking section 23 of MSMED Act. Held: Section 23 of MSMED Act has specifically prohibited the assessee from claiming the deduction from the income on account of interest paid to MSME. Section 24 is having overriding effect to the extent of any inconsistent provisions contained in any other law for the time being. Also as per section 16 of said Act, payment of interest on delayed payment is in the nature of penalty or it is penal interest. Therefore, once payment of interest on delayed payment to MSME was regarded as penal in nature then said expenditure was otherwise not allowable in view of Explanation to section 37(1).
REFERRED :
FAVOUR : Against the assessee
A.Y. : 2010-11
INCOME TAX ACT, 1961
Section 35(2AB)
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