TMI Blog1992 (5) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... nt allowance were claimed and allowed on the basis of such actual cost. Subsequently on account of retrospective amendment of the definition of actual cost under section 43, the ITO passed an order under section 154 in assessment years 1982-83 and 1983-84 withdrawing a part of depreciation and investment allowance granted on the enhanced cost on account of capitalisation of bill discounting charges, etc. Thus the depreciation and investment allowance to the extent it was attributable to the element of bill discounting charges included in actual cost were withdrawn in view of the retrospective amendment of section 43. The appellant company thereafter put forward a claim for deduction of interest on accrual basis in each of the subsequent years. Accordingly accrued interest of ₹ 1,00,900 pertaining to previous year relevant to assessment year 1984-85 was claimed by the assessee. The ITO allowed ₹ 26,000 only on the basis of actual payment of discount's charges made during the previous year. The ITO rejected the assessee's claim for grant of deduction of interest on accrual basis claim of ₹ 1,00,900. The assessee raised this ground in the appeal against the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprehend the chart submitted by the assessee. The assessee's appeal against the order under section 154 has been dismissed by the Commissioner (Appeals) on the ground that the accrued interest worked out by the assessee has not become due/payable in the previous year relevant to assessment year 1984-85. The claim for deduction of accrued interest does not directly arise from amendment in the definition of actual cost and consequent withdrawals of depreciation and investment allowance. The amount of accrued interest now claimed as deduction has not been debited to P L A/c. and, therefore, it cannot be allowed even under mercantile system of accounting and not in any case by resort to proceedings under section 154. Such grounds given by the Commissioner (Appeals) are not valid. The deduction in respect of the entire amount of accrued interest ought to have been allowed as a deduction. 5. The learned Departmental Representative relied on the orders of the Commissioner (Appeals) as well as the order passed by the assessing authority. He further submitted that Explanation 8 in section 43 w.e.f. 1st April 1974 only clarifies that the interest pertaining to the post-productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of purchase price is higher and accrued interest is lower in latter years when unpaid portion of purchase price is lower. On the contrary the discounting charges is lower in the initial years while it is higher in the latter years. However, the total aggregate amount of interest payable by the assessee would be the same as figure of ₹ 3,98,700. The following chart clarifies this position : Assessment Year Discounting charges Rs. Accrued Interest Rs. 1982-83 Nil 6,500 1983-84 8,400 98,400 1984-85 26,600 1,00,900 1985-86 54,200 87,700 1986-87 88,900 67,500 1987-88 1,40,000 35,200 1988-89 80,500 2,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, such excess deduction granted in subsequent years, if any, will be withdrawn. The total amount of deduction whether it is allowed on the basis of accrued interest basis on entire unpaid purchase price or whether it is allowed on the basis of discounting charges, will not exceed total sum of ₹ 3,98,700 for assessment years 1982-83 to 1988-89 as per the chart given above. This observation has been made with a view to clarify that aggregate amount of deduction allowed in all these years should in no case exceed the total amount of ₹ 3,98,700. The ITO is directed to allow necessary relief after verifying the correctness of the calculation of accrued interest. 7. Now we will consider the Revenue's appeal for assessment year 1983- 84, one against the order of the Commissioner (Appeals) relating to assessment made under section 143(3) and the other against the order of the Commissioner (Appeals) against the order under section 154 passed by the ITO on 2nd February 1987. 8. We will first deal with Income-tax Appeal No. 1173/Ahd/1989 for assessment year 1983-84 relating to assessment under section 143(3). Ground No. 1 is against the deletion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to debit balance in the accounts of these two parties has not been disputed. No such disallowance out of interest has been made in the earlier or subsequent years. Considering the detailed reasons given by the Commissioner (Appeals) and in view of the aforesaid discussions, we confirm the deletion made by the Commissioner (Appeals). 9. The next issue relates to deletion of an addition made under section 40A (7) of ₹ 30,389. This was the common contention of the learned representatives that this relief granted by the Commissioner (Appeals) is fully supported by the decision of the Tribunal in several cases of associated concerns. This is a case of actual payment of funds to LIC and is not merely a provision. Respectfully following the decisions of the Tribunal in the case of Commissioner v. Gujarat Machine Tools in Income-tax Appeal No. 666/Ahd/1985 we confirm the order of the Commissioner (Appeals) holding that the said payment is not hit by section 40A (7). 10. Now we will take up Income-tax Appeal No. 1172/Ahd/1989. The only point in this appeal by the Revenue relates to findings given by the Commissioner (Appeals) that the action of the ITO under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Appeals) is, therefore, confirmed. 12. The second ground relates to directions given by the Commissioner (Appeals) to verify the challans of unpaid sales tax and provident fund and allow the deduction out of the disallowance made under section 43B, where payments have been made within due date in respect of unpaid sales tax and provident fund. 12.1 The learned representatives agreed that such a view taken by the Commissioner (Appeals) is fully supported by the decision of the Tribunal in the case of Chandulal Venichand v. ITO (1991) 40 TTJ (Ahd) 358 : (1991) 38 ITD 138 (Ahd). Respectfully following the said decision the view taken by the Commissioner (Appeals) is confirmed. 13. In ground No. 3 the Revenue has contended that the Commissioner (Appeals) has erred in holding that the unpaid amount of family pension fund and Employees State Insurance Fund was not covered by section 43B and accordingly directed the ITO to delete the said addition. 13.1 The ITO made an addition of ₹ 4,718 and ₹ 1,035 being the amount of E.S.I. and family pension in view of section 43B. The Commissioner (Appeals) held that the provisions of section 43B are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 28th April 1992 was also submitted confirming that such interest on sales tax was paid suo moto by the assessee for the period for which payment was delayed and that separate penalty is leviable for the default of late payment. Such penalty have been treated as disallowable in assessment of total income. The learned counsel also relied on various decisions reported in Rajasthan Central Stores Pvt. Ltd. v. Commissioner (1984) 43 CTR (Raj) 241, Commissioner v. Western Indian State Motors (1987) 65 CTR (Raj) 1, Triveni Engineering Works Ltd. v. Commissioner (1987) 167 ITR 742 (All), Commissioner v. Iswari Khetan Sugar Mills Ltd. (1988) 172 ITR 430 (All) and Commissioner v. Kamlapat Motilal (1988) 172 ITR 438 (All) to support their contention that the Commissioner (Appeals) has rightly allowed this deduction. 16. After carefully considering the submissions made by the learned representatives and after going through the various judgments relied upon by the assessee's counsel we are of the view that the Commissioner (Appeals) has rightly allowed the deduction in respect of the interest paid for late payment of sale tax, which is clearly compensatory in nature. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Cal); Commissioner v. Harinkhola Ice Cold Storage Ltd. (1982) 134 ITR 540 (Cal) and Commissioner v. J.K. Synthetics Ltd. (1990) 182 ITR 125 (Del) fully support the view taken by the Commissioner (Appeals). The Commissioner (Appeals) also got the correctness of bifurcation of income of the two units, verified by the ITO, who in his report dated 30th December 1987 has confirmed the correctness thereof. We do not find any justification in interfering with the findings given by the Commissioner (Appeals) in relation to this ground. 18. The last ground relates to deletion of disallowance made under r. 6D out of travelling expenses. The ITO disallowed under r. 6D a sum of ₹ 15,714. It was contended on behalf of the assessee before the Commissioner (Appeals) that the disallowance ought to have been restricted under r. 6D at ₹ 11,745 as per calculation submitted by the assessee company. The Commissioner (Appeals) directed the ITO to work out the disallowable amount under r. 6D by taking total expenditure for the whole year rather than taking the expenditure of the individual tour in consonance with the decision of the Tribunal in the case reported in S.V. Ghatalia v ..... 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