TMI Blog2024 (5) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... d in ITA/1/2018. The substantial questions of law as framed in ITA/1/2018 as framed by this Court are reproduced below:- "1. Whether in the facts and in the circumstances of the case, direction of the Income Tax Appellate Tribunal allowing an amount of Rs. 1,40,77,397/- under Section 43B (d) of the Income Tax Act, 1961 was perverse, in the absence of such amount not having been debited to the profit and loss account and not having been claimed by the assessee in their return or revised return? 2. Whether the Income Tax Appellate Tribunal, in directing deletion of addition by the Assessing Officer of a sum of Rs. 1,24,31,423/- as interest from non-performing assets, had properly construed the provision of Section 43D of the Act, the said sum representing interest on non-performing assets which were not accounted for by the assessee? 3. Whether Income Tax Appellate Tribunal erred in directing deletion of interest of recurring deposit of Rs. 11,74,79,000/- which was added by the Assessing Officer in a situation where the assessee represented that the interest accrued in the year of maturity and not during the subsistence of the deposit tenure?" 3. The substantial question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ITAT dated 16.10.2015 in ITA No. 388/Kol/2008 and cross appeal in ITA/464/Kol/2008 [assessment year 2001-02], the revenue has filed the present appeal in ITA No. 1/2018. 7. The ITAT has considered the aforesaid issue in detail and recorded its finding in paragraph 9 of the impugned order, as under:- "9. We have given a very careful consideration of the rival submissions. From a perusal of the remand report of the AO, a copy of which is placed at page 39 of the paper book filed by the assessee, it is clear that the AO does not dispute the fact that an amount of Rs. 1,40,77,397/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the concerned assessment year including the notings made by the officials of the appellant. Yet, the Income-tax Appellate Tribunal entertained the claim as permissible, even though for the first time before the Income-tax Appellate Tribunal, in appeal under section 254 of the 1961 Act, by relying on the dictum of this court in National Thermal Power Co. Ltd. Further, the Income-tax Appellate Tribunal has also expressly recorded the no objection given by the representative of the Department, allowing the appellant to set up the fresh claim to treat the amount declared as capital expenditure in the returns (as originally filed), as revenue expenditure. As a result, the objection now taken by the Department cannot be countenanced. Learned Additional Solicitor General had placed reliance on the decision of this court in Goetze (India) Ltd. v. CIT in support of the objection pressed before us that it is not open to entertain fresh claim before the Income-tax Appellate Tribunal. According to him, the decision in National Thermal Power Co. Ltd. merely permits raising of a new ground concerning the claim already mentioned in the returns and not an inconsistent or contrary plea or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncertainty in so far as recovery of interest was concerned, as a result of the aforesaid precarious financial position of Shaw Wallace. What to talk of interest, even the principal amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not "accrued". We are in agreement with the submission of Mr. Vohra on this count, supported by various decisions of different High Courts including this court which has already been referred to above. (2) In the instant case, the assessee-company being NBFC is governed by the provisions of the RBI Act. In such a case, interest income cannot be said to have accrued to the assessee having regard to the provisions of section 45Q of the RBI Act and Prudential Norms issued by the RBI in exercise of its statutory powers. As per these norms, the ICD had become NPA and on such NPA where the interest was not received and possibility of recovery was almost nil, it could not be treated to have been accrued in favour of the assessee." Relevant portion of the judgment of Hon'ble Supreme Court in the case of Vasisth Chay Vyapar Ltd. (supra) is also reproduced below:- "2. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the financial year ended March 31, 2005 at page 33 of the Paper Book in ITA No. 1080/K/2009 for the assessment year 2005-06. It was submitted that in the event the grounds relating to interest on recurring deposit in the revenue's appeals for the assessment years 2001-02, 2003-04 and 2004-05 are adjudicated against the assessee, the AC should be directed to exclude such interest accounted for and offered to lax in the assessment year 2005-06 from the assessment for that year. 25. On behalf of the revenue, reliance was placed on the judgment of the Hon'ble Supreme Court in CIT v T.N.K. Govindarajulu Chetty, (1987) 165 ITR 231 (SC). That case related to interest on land acquisition compensation and it was held that such interest accrued on year to year basis. In the instant case, there was no accrual since the interest was neither due nor receivable until maturity. The decision of the Hon'ble Supreme Court in CIT v. A.Gajapathy Naidu, (1964) 53 ITR 114 (SC) sought to be relied upon on behalf of the revenue actually supports the plea of the assessee in its contention that interest income is taxable only upon maturity when the right to receive interest accrued to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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