Penalty- Deduction

Please help me with this question Mr A running a business of manufacturing steel castings was charged penalty by RK Steels, his suppliers for paying dues 2 months late. Is this penalty a deduction while computing income tax? Will your answer change if such penalty was charged by GST Authorities for late payment of GST?

Suraj Narayanan

Suraj Narayanan

CA Inter


04-Oct-20 16:00


Answers (1)

For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Penalty charged by supplier allowed. Late payment of GST is not an offence prohibited by law. Hence will be allowed.

Suraj Lakhotia

Suraj Lakhotia


05-Oct-20 15:46