TMI Blog2021 (2) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... erved by the A.O, as the interest debited/charged by the bank got converted into further liability wherein the existing debit balance would be further increased in the overdraft account thus, any payment of an amount towards interest would partake the character as that of repayment of the existing amount of the principal loan and not the interest claimed by the assessee. We find that the aforesaid issue had been looked into by the Hon ble High Court of Madras in CIT Vs. Prakash Food Feed Mills Pvt. Ltd. [ 2014 (11) TMI 1232 - MADRAS HIGH COURT] .wherein not finding favour with the view taken by the A.O had observed, that as the interest amount paid by the assessee through overdraft/cash credit account was not similar to loan accounts, thus, the Explanation 3C or Explanation 3D to Sec. 43B would not be applicable insofar the interest amount had been actually paid by the assessee through overdraft/cash credit account and the same has not been converted into loan or advance, as the case may be. Backed by its aforesaid observation the Hon ble High Court had dismissed the appeal of the revenue. We find that following the aforesaid judgment of the Hon ble High Court of Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee had debited bank interest expenses of ₹ 1,93,79,723/- in his profit and loss account for the year in question. On being queried that as to why the aforesaid interest expenditure may not be disallowed in case the same was not actually paid within the meaning of Sec. 43B(d)/(e) r.w Explanation 3D , it was submitted by the assessee that as the interest charged by the bank was fully recovered from his bank accounts and nothing was pending for payment since entire amount of interest was paid in the subsequent month thus, the provisions of Sec. 43B(d)/(e) r.w Explanation 3D were duly complied. Apart from that, the assessee in support of his claim that no disallowance as per the aforesaid statutory provision was called for in his case took support of the orders passed by the Tribunal in his own case for the preceding years. However, the aforesaid contention of the assessee did not find favour with the A.O. On a perusal of the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of interest expenditure made by the A.O under Sec.43B(d)/(e) r.w Explanation 3D was vacated by the Tribunal, it was observed by the A.O that the department had not accepted the said order of the Tribunal and had carried the matter further in appeal. On the basis of his aforesaid deliberations the A.O assessed the income of the assessee vide his order passed under Sec. 143(3), dated 14.12.2017 at ₹ 2,38,38,368/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the Tribunal while disposing off the appeal in the assessee s own case for A.Y. 2011-12 in ITA No. 2230/Mum/2015 had vacated the disallowance of the interest expenditure that was on identical grounds made by the A.O under Sec. 43B(d)/(e) r.w Explanation 3D , and had upheld the order passed by his predecessor. Apart from that, it was noticed by the CIT(A) that following its aforesaid order for A.Y. 2011-12 the Tribunal had thereafter in the assessee s own case for A.Y. 2013-14 and A.Y. 2014-15 in ITA No. 778 779/Mum/2018, vide its order dated 27.02.2019 had therein vacated a similar disallowance of interest made by the A.O under Sec. 43B(d)/(e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of : (a) to (c) .. ..................... (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution [or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement governing such loan or borrowing [, or] (e) any sum payable by the assessee as interest on any [loan or advances] from a scheduled bank [or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank] in accordance with the terms and conditions of the agreement governing such loan [or advances],] [or] . [ Explanation 3D for the removal of the doubts, it is hereby declared that deduction of any sum, being interest payable under clause (e) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate bench of the Tribunal i.e ITAT, Bench I , Mumbai in the assessee s own case for A.Y: 2011-12 in ITA No. 220/Mum/2015 had vacated a similar disallowance of interest paid by the assessee on its overdraft/cash credit account under Sec. 43B(d)/(e) r.w Explanation 3D to Sec. 43B, observing as under: 4. We have considered the rival contentions of the parties and gone through the orders of authorities below. We have seen that during the assessment from the P L A/c the AO has observed that assessee has debited an amount of ₹ 57,88,447/- towards bank interest. The assessee was asked to furnish the proof of actual payment and also show-caused as to why the same should not be disallowed, if the same was not actually paid within the meaning of the provision of section 43B(d)/(e) r.w. Explanation 3D thereto. The assessee filed his reply dated 22.01.2014 and contended that all the payments are made during the year, hence the disallowance u/s 43B(d)/(e) is not applicable. The assessee also filed the ledger copy of bank charges and bank interest paid to UBI. The AO not accepted the explanation furnished by assessee and disallowed the interest. Before the ld. CIT(A) it was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e OD Account and sufficient amount was deposited after debit of interest, in every month. Therefore, the observation of the AO that said interest was not paid during the year and converted into loan, is not factually correct. 7.2. The contention of the AO that the interest has been converted into loan, on the ground that the balance in OD Account was always remained a debit balance, is not correct as the OD limit of the CC Account was increased from ₹ 1.5 crores to ₹ 3 crore, which was not considered by the AO. Since the Closing balance i.e. (-) ₹ 2.80 crores, as on 31.03.2011, in the OD Account is less than the OD limit of ₹ 3 crores, indicate that the same is on account of principle loan and not on account of interest. Considering the facts of the case in entirety, above discussion and respectfully following the above decisions quoted, the addition made by the AO, on this account is hereby, deleted. This ground of appeal is allowed accordingly. 5. The Hon ble Madras High Court in CIT vs. Prakash Foods Feed Mills P. Ltd. (supra) while deciding the similar ground held as under: 3. We have heard the learned Standing Counsel appearing for the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where interest amount has not been converted into loan or borrowing (or) loan or advance, as the case may be, there is no question of denying the benefit of deduction. In the case on hand, the interest amount has been actually paid by the assessee through Overdraft/Cash Credit account and the same has not been converted into loan or borrowing (or) loan or advance, as the case may be. 7. For the foregoing reasons, these appeals are dismissed by answering the question of law against the Revenue and in favour of the assessee. 6. Thus, in view of the ration of the decision of Madras High Court (supra), we find that the ground of appeal raised in the present appeal is covered against the revenue, thus we do not find any illegality or infirmity in the order passed by ld. CIT(A). 7. In the result, appeal of the Revenue is dismissed. As the facts and the issue involved in the appeal of the assessee for the year in question remains the same as were there before the Tribunal in the assessee s own case for A.Y. 2011-12 in ITA No. 2230/Mum/2015, we, thus, respectfully follow the same. Accordingly, finding no infirmity in the view taken by the CIT(A) who in our considered view h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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