TMI Blog2021 (3) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 24-3-2021 - SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER For the Revenue : Smt.Nivedita Biswas, DR For the Assessee : Shri S.Phanindra, AR ORDER PER S.S.GODARA , J. M. This Revenue s appeal for AY.2016-17 arises from the CIT(A)-2, Hyderabad s order dated 24-05-2019 passed in appeal No.10259 / 2018-19 / CIT(A)-2 in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, the Act ]. Heard both parties. Case file perused. 2. The Revenue s sole substantive grievance pleads that the CIT(A) has erred in law and on fact in restricting the Assessing Officer s action making Section 43B interest disallowance of ₹ 6,83,24,520/- as under: 4. Contentions of the AO: The findings of the Assessing Officer are extracted below (relevant portion of the assessment order reproduced):- The assessee is a Private Limited Company; which furnished its return of income for the assessment year 2016-17 on 15-10-2016 electronically under section 139(1) of the Income-tax Act, 1961 admitting loss of ₹ 2,01,87,118/-. Subsequently, the assessee filed a revised return admitting a loss of ₹ 1,81,15,077/-. The af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessing officer has disallowed interest expenditure of ₹ 6,90,10,878/- U/s 438 though none of the loans were borrowed from bank's or financial institutions and provisions of Section 43B are not at all attracted. The assessing officer disallowed ₹ 4,87,590/- being rates and taxes even though proof of payment was filed. He has disallowed leave salary of ₹ 5,676/- though the same was disallowed by the appellant itself in the return. Further he has not set off the brought forward losses against the income determined. Aggrieved by the above, the appellant prefers this appeal . During the course of appellate proceedings the appellant submitted the following written submission is as under: The appellant is a State Government Company and it filed a return declaring loss of ₹ 1,81,15,080/- for assessment year 2016-17. The return was picked up for scrutiny and the income is determined at ₹ 5,13,89,067/- and a demand of ₹ 172,90,196 has been raised. The major disallowance made by the assessing officer is ₹ 6,90, 10,878 being interest on the ground that it is only a provision and also a contingent liability and not actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est to APRDC 3,00,00,000 Interest provision made, no income tax deducted during the year, Income tax will be deducted at the time of payment 2 Interest to APCSC 2,18,55,357 Interest provision made, no income tax deducted during the year, Income tax will be deducted at the time of payment 3 Interest on loan from Govt. of AP 1,50,00,000 Interest provision made. This pertains to Government. No income tax deducted. 4 Interest on loan from Govt. of AP (Bobbili sethanaga ram) 11,71,443 Interest provision made. This pertains to Government. No income tax deducted. 5 Interest on Purchase Tax loan 2,97,720 Interest provision made. This pertains to Government. No income tax deducted. Total 6,83,24,520 4.5.1 In response, Sri G.Prasad, CA and AR o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case the' APRDC and APCSC are not come under the purview of State Financial Corporation and State Industrial Investment Corporation, hence the above institutions does not fit into the provisions of Section 43B(d). Hence, the contention of the assessee is rejected on this count. iii. Without prejudice to the above proposition, the assessee itself stated int eh breakup statement that the above amounts are interest provision made. Under the provisions of the Act any provision for expenditure could not be allowed unless crystallized. Hence, the argument of the assessee is rejected, on this count also. In view of the above discussion, interest provision of ₹ 6,83,24,520/- is disallowed and added to the total income . 5.2. During the course of appeal proceedings, the appellant's AR field written submissions, contesting the said disallowance as under: The appellant had taken loans from Government of Andhra Pradesh and also from Government Corporations to meet its working capital requirements. Interest on such loans had been provided in the books at the agreed rates of interest. Such interest and loans were unpaid due to financial stringency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act reads as under: 43B 'Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable' under this Act in respect of- (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 advance] from a scheduled bank lor a co-operative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank] in accordance with the terms and conditions of the agreement governing such loan lor advances], [or] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. ' As can be seen from a plain reading of the section, it ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, as in A.Y. 2014-15, therefore, the same is allowed to the extent of above, however it is seen that the as regards interest paid to Binny Ltd., the remarks mentioned are that the interest was fully recovered by the Income Tax Department on account of presumably recovery proceedings. If the said amount which was due on account of interest payment by the appellant was recovered fully by the Income Tax Department, then there was no option left with the appellant to deduct TDS on the same, as the appellant could not have further deducted TDS as nothing was due to Binny Ltd. in the books of the appellant however the appellant is directed to provide full details to the AO and if the situation states otherwise, then obviously the appellant was liable to deduct TDS. In view of the above directions, the appellant is directed to file the ledger before the AO and the AO is directed to take action accordingly. To sum up the ground no. 2 is partly allowed . 3. We have given our thoughtful consideration to rival pleadings against and in support of the CIT(A) findings deleting the impugned Section 43B interest disallowance. It is not in dispute that the CIT(A) herein has gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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