Interest Levied On Arrears Or Late Payment Of Customs Duty Allowable On Actual Payment Basis: ITAT

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that customs duty is allowable only on a payment basis under section 43B of the Income Tax Act. The interest levied on arrears or late payment of customs duty is also allowable on an actual payment basis under section 43B. The two-member bench of George George K (Judicial Member) and Laxmi Prasad Sahu (Accountant Member) has directed the AO to verify the nature of the levy of interest on customs duty and decide the allowability of deduction. The appellant/assessee is a company engaged in the import of computer peripherals from its Associated Enterprises (AEs) for sale in India and also renders certain support services. The assessee has challenged the disallowance of interest on customs duty amounting to Rs. 34,68,84,164. The AO disallowed the interest on customs duty for the reason that interest on customs duty is allowable on an actual payment basis under section 43B. The DRP confirmed the action of the AO. The assessee contended that interest on customs duty is not covered by section 43B, hence deduction should be allowed even if actual payment is not made. The Tribunal noted that the applicability of section 43B in respect of interest on customs duty depends on whether interest on customs duty is levied for keeping the imported goods in the customs warehouse beyond the statutory period or for non-payment of customs duty. The ITAT observed that the AO had not examined the nature of the levy of interest on customs duty. The tribunal stated that if the interest on customs duty is payable for keeping the imported goods in the customs warehouse beyond the statutory period, the interest would not be covered by section 43B and would be allowable as a deduction even if it is not paid. However, if the interest on customs duty is payable for the arrears of customs duty or delayed payment of customs duty, then the interest would be regarded as part and parcel of the customs duty. In such circumstances, the assessee cannot get a deduction for interest payable as such interest is directly linked to non-payment or late payment of customs duty. Case Title: M/s.HP India Sales Private Versus The Joint Commissioner of Income-tax Citation: IT(TP)A No.524/Bang/2017 Dated: 27.07.2022 Counsel For Appellant: Senior Counsel Ajay Vohra Counsel For Respondent: CIT-DR Harishchandra Naik Click Here To Read/Download Order

Interest Levied On Arrears Or Late Payment Of Customs Duty Allowable On Actual Payment Basis: ITAT

Mariya Paliwala

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