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2015 (11) TMI 926 - AT - Income TaxDisallowance of relief u/s 43B - interest on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 - Held that:- It is clear that the AO does not dispute the fact that an amount was interest on term loan which was paid to ICICI during the previous year relevant to A.Y.2001-02. It is also not in dispute that the provision of section 43B of the Act will apply to such interest payment and therefore the interest expenditure in question cannot be claimed by the assessee as deduction in any other assessment year in view of the specific bar contained in section 43B(d) of the Act. In other words irrespective of the method of accounting following by the assessee, interest, expenses of the nature referred to section 43B(d) of the Act can be allowed as a deduction only in the year in which such interest are actually paid. The debit to the profit and loss account of an amount which is claimed as deduction u/s 43B of the Act is not a requirement and the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (1998 (9) TMI 78 - CALCUTTA High Court) supports the plea of the assessee in this regard. The only objection which remains for consideration is as to whether in the absence of a revised return of income filed by the assessee making claim for deduction on account of interest expenses the deduction can be allowed. The reliance placed by the revenue in this regard is on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. (2006 (3) TMI 75 - SUPREME Court ) wherein it has laid down that the AO cannot consider a claim made by an Assessee before him, in the absence of such claim being made in the return of income or a revised return of income. As rightly contended by the ld. Counsel for the assessee, such a bar does not extend to the appellate authorities under the Act. The decisions referred to by the ld. Counsel for the assessee squarely support the stand of the assessee in this regard. We, therefore, hold that a sum should be allowed as deduction. - Decided in favour of assessee. Addition of interest on account of non-provision of interest on Non-performing Asset (NPA) - CIT(A) deleted the addition - Held that:- In the instant case due to uncertainty in collection there was no accrual of income having regard to the real income theory which is engrained in the RBI's prudential norms for recognition of revenue as held by the Hon'ble Delhi High Court in Vasisth Chay Vyapar Ltd.[2010 (11) TMI 88 - Delhi High Court]. As such, the assessee did not account for such interest. The judgment of the Hon'ble Supreme Court in State Bank of Travancore's case (1986 (1) TMI 1 - SUPREME Court) actually supports the assessee. In that case, it was held that the concept of real income was certainly applicable in judging whether there had been income or not. Thus hold that the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case (1997 (7) TMI 4 - SUPREME Court) but the fact is that there is no accrual of income in so far as the assessee is concerned. CIT(A) was justified in coming to the conclusion that interest on NPA need not be recognized as income by the Assessee. - Decided in favour of assessee. Addition on account of interest on Recurring Deposits made on accrual basis - CIT(A) deleted the addition - Held that:- Accrual of interest is only upon maturity and there is no question of any income escaping assessment on accrual basis. On behalf of the revenue, it was also submitted that the three decisions relied upon in connection with non- provision of interest on NP A were also relevant for deciding the ground relating to interest on recurring deposits. We are of the view that none of the said decisions is of any assistance to the revenue since there is no accrual of interest prior to maturity. - Decided in favour of assessee. Write off under section 36(1)(vii) on interest income - Held that:- The facts show that there was a debit to the profit and loss account of a sum of ₹ 26,43,24,776 because the credit side of interest income shown in the profit and loss account was reduced to this extent and this has the effect of a debit to the profit and loss account. However as to whether the debtors account was reduced to the extent of ₹ 26,43,24,776 by way of write off of interest to that extent is a matter which requires verification by the AO and if factually it is found that there was such a write off than the deduction claimed by the Assessee had to be allowed as deduction as the conditions for allowability of such deduction laid down u/s.36(1)(vii) of the Act are satisfied. The decision referred to by the CIT(A) in the case of State Bank of Hyderabad (2005 (3) TMI 403 - ITAT HYDERABAD-B ) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground of assessee subject to verification of the write off in the debtors account as stated above. Computation of interest under section 234C - Held that:- The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income filed and not on the tax payable on the total income declared in the original return of income is contrary to the provisions of explanation to Sec.234C(1) of the Act. Charging of interest is mandatory and if there are good ground waive interest than it is for the Assessee to seek appropriate remedies open to it in law. The CIT(A)'s order in our view is contrary to the provisions of law and cannot be sustained. Accordingly, the appeal of the revenue is allowed. - Decided against assessee Disallowance u/s 14A r.w.r. 8D - Held that:- We are however of the view that the disallowance under Sec.14A of the Act cannot be in excess of the tax free income earned by the Assessee during the previous year. We therefore hold that the disallowance u/s.14A of the Act be restricted to the tax free income earned by the Assessee. The direction given above will result in relief to the Assessee than what was given by the CIT(A). - Decided against revenue Disallowance u/s.35D - Registration Fees for change in object clause - same was debited under the head "Miscellaneous Expenditure" and 1/10th of the said amount as amortised every year - Held that:- In Gujarat Narmada Valley Fertilizers Ltd. (2013 (8) TMI 300 - GUJARAT HIGH COURT) held on identical facts that the disallowance of expenses u/s.35D of the Act which is to be allowed over a period of 10 years cannot be disallowed in the 7th year. In that case, Preliminary expenses were amortized claimed as deduction u/s. 35D. The same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissibl. However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted. On appeal by the Revenue, the Hon'ble Gujarat High Court held, since last several years, AO had granted such claim on same consideration. The Hon'ble High Court held that following rule of consistency, Tribunal therefore, correctly held that such claim could not have been suddenly disallowed and the Revenues' appeal was dismissed. In the present case also the allowance of expenses has been made in the past and it was sought to be disturbed for the first time in AY 07-08. Such action cannot be sustained. Respectfully following the decision of the Hon'ble Gujarat High Court we hold that the disallowance u/s.,35D of the Act be deleted. - Decided in favour of assessee.
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