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2019 (8) TMI 611

..... present case the assessee company has not claimed waiver of interest on GOI Loan, Guarantee Fee and commitment fee as its expenditure. It is pertinent to note that the waiver of the Interest on loan by the Government of India as well as waiver of LIC guarantee fee along with waiver of Government of India loan has been rightly indicated in the financial statements produced before the AO and the same were reflected in the books of accounts. Therefore, addition on account of Section 41(1) does not sustain. AO as well as the CIT(A) are not correct in making and confirming the addition. We also decide the issue in dispute in favour of the assessee and dismiss the ground of appeal filed by Revenue. - ITA No:- 1911/Del/2017 - 8-8-2019 - Shri Bhavnesh Saini, Judicial Member And Shri Anadee Nath Misshra, Accountant Member For the Assessee : None For the Revenue : Shri S.S. Rana, CIT(DR) ORDER PER ANADEE NATH MISSHRA, AM This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-39, New Delhi, [ Ld. CIT(A) , for short], dated 23.11.2016 for Assessment Year 2012-13. The grounds of appeal are as under: i. On the facts and in the circumstances of the case .....

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..... f the Income-tax Act, 1961 were amended w.e.f. 1 4.1987 to disallow deductions on account of interest due but not actually paid to any scheduled bank in additions to other public Financial Institutions and Corporations. In the case of the assesses company. interest on borrowings from COI were not paid by it though the due amount was debited to the Profit & Loss A/c. The provisions of section 43B(d) & (e )were; conceived precisely for such situations where the assessee claims deductions on account of interest payments due towards Public Financial Institutions and Banks without actually paying the same. By narrowly construing the section so as to exclude the interest payments due on borrowings from the Govt., while disallowing similar accruals in respect of Institutions partly or fully funded by the Govt the intention of the legislature behind enacting the law 7 not being honored. In view of this, it is held that interest accruing on the Govt, borrowings but not actually paid before the date of filling of the return, shall be hit by the provisions of section 43B of the income-tax Act, 1961 and shall be disallowed." 4.3 Placing reliance on the aforesaid and further when d .....

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..... ount was debited to the Profit & Loss A/c. The provisions of section 43B(d) & (e) were conceived precisely for such situations whether the assessee claims deductions on account of interest payments due towards Public Financial Institutions and Banks without actually paying the same. By narrowly construing the section so as to exclude the interest payments due on borrowings from the Govt., while disallowing similar accruals in respect of Institutions partly or fully funded by the Govt., the intention of the legislature behind enacting the law is not being honored. In view of this, it is held that interest accruing on the Govt, borrowings but not actually paid before the date of filling of the return, shall be hit by the provisions of section 43B of the income-tax Act, 1961 and shall be disallowed. 5.1 The reason adduced by the AO was that during the relevant previous year, no material changes have taken place, the facts and circumstances remained unchanged, the position of law remained unchanged besides, the arguments of the appellant are also on the same lines as in earlier years. It may not be out of place to mention that while at Para 4.3 of the impugned order, ₹ 5, .....

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..... s not contested further accepted by the department." This issue has also been dealt with by the ITAT Delhi in ITA No. 4927/ Del/2013 in Hindustan Fertilizers Corporation Ltd Vs DCIT Cir 12(1), New Delhi for AY 2005-06 wherein the disallowance of unpaid interest on borrowings from GOI made in the assessment has been deleted mentioning inter alia, 7. We have considered the rival submissions on this issue and have gone through the material available on record. A perusal of the assessment order reveals that the Assessing Officer had disallowed on amount of ₹ 8,90,58,45,000/- on account of interest on borrowings by observing that this amount was being disallowed keeping in view the treatment given to this interest in preceding assessment year 2004-05. He therefore, held that the interest claimed was the accrued interest and had not been paid by the assessee. He, therefore, disallowed the same. We find that the Id. CIT(A) has rightly considered the contention of assessee that in A. Y. 2004-05, the Id. CIT(A) had already given relief to the assessee vide order dated 10.07.2007 wherein the issue has been adjudicated by the CIT(A) in favour of the assessee. The Id. CIT (A) has al .....

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..... under the purview of Government of India, Ministry of Chemical & Fertilizers. The same was made for the purpose of reviving the industry. Thus, it can be seen that the assessee Company incurred a heavy loss and Government of India s policy reflected that the PSU will be given FCI Inter-corporate Loan which will be settled by the Government of India. The assessee at no point of time has claimed waiver of interest on GOI Loan, Guarantee Fee and commitment fee as its expenditure. In-fact, these were the Government Policies and will come under the purview of Section 2(XVIII) as grant in aid. The reliance of the Ld. DR on the Hon ble Delhi High Court s decision in case of Rollatainers Ltd. Vs. CIT (2011) 339 ITR 54(Delhi) does not apply in the present case as the Hon ble High Court therein held that wavier of loan taken in the course of carrying on business was recorded in the books of accounts. In the present case the assessee company has not claimed waiver of interest on GOI Loan, Guarantee Fee and commitment fee as its expenditure. It is pertinent to note that the waiver of the Interest on loan by the Government of India as well as waiver of LIC guarantee fee along with waiver of .....

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..... s regarded as benefit in revenue field and, accordingly, addition made by Assessing Officer was confirmed. Assessee filed instant appeal challenging addition upheld by Tribunal. It was held that following order passed by Court in case of Logitronics (P.) Ltd. v. CIT [2011] 197 Taxman 394 / 9 taxmann.com 302 , impugned order of Tribunal did not require any interference. 2. Loqitronics (P.) Ltd. Vs CIT r20111 9 taxmann.com 302 (Delhi)/r20111 197 Taxman 394 (Delhi)/r20111 333 ITR 386 (Delhi)/r20111 240 CTR 20 (Delhi) (Copy Enclosed) Hon ble Delhi High Court held that taxability of waiver of loan by bank would depend upon purpose for which said loan was taken. If loan was taken for acquiring capital asset, waiver thereof would not amount to any income exigible to tax, but, on other hand, if loan was taken for trading purpose and was treated as such from very beginning in books of account, waiver thereof may result in income, more so when it was transferred to profit and loss account. (3.2) In fairness, the Ld. CIT(DR) informed that identical submissions were also made before Co-ordinate Bench of ITAT, Delhi; and it had already been considered by the aforesaid Co-ordinate Bench of ITAT, .....

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