9911796707
TMI Blog2025 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee are directed against orders dated 12.05.2023 passed by the Commissioner of Income Tax (Appeals), NFAC, New Delhi [hereinafter, the 'CIT(A)']. 3. Three grounds of appeals have been raised in these appeals. However, except the issue of disallowance of interest paid on Government loans, no other grounds were pressed in these years. Thus, non-pressed grounds stand dismissed in both years. Now, we are tasked to decide the sole issue that whether the disallowance of interest payable on Government loans is allowable expenditure. The case with the ITA No. 61/DDN/2023 for AY 2016-17 is taken as a lead case. 4. The facts of the case giving rise to these appeals are that the assessee, a Government Corporation filed its Income Tax Retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both years. In fact, the assessee was neither paying any interest to the U. P. Government nor receiving any interest from its subsidiaries whom part of borrowed fund was advanced as interest bearing loan. 4.1 The relevant finding of the AO, in this regard, in the AY 2016-17 is reproduced herein below per proper appreciation of the facts: "16. On perusal of Balance Sheet for AY 2006-07 it revealed that assessee company has shown- (A) unsecured loan Rs. 12,78,31,611/- as on 31.03.2005;(B)unsecured loan Rs. 18,25,87,611/- as on 31.03.2006;(C) interest accrued & due thereon Rs. 10,07,83,849/- as on 31.03.2005(D) interest accrued & due thereon Rs. 11,20,64,541/- as on 31.03.2006. It is further observed that the amount (C) is almost 78.84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expense will not be disallowed as it is actually not paid. In reply, the A/R further explained that while the assessee company received Govt. Loan at the same time part of it was advanced to its subsidiary companies such as M/s. U.P.Digital Ltd., M/s Transcable Ltd., M/s Teletronix Ltd. etc. as loan, as per the directions issued by State Govt. time to time. Basically the Govt. loan is distributed to these Govt. undertakings through the assessee company. As the assessee is liable to pay interest in Govt. loan similarly the companies, which are receiving the loan from the assessee company are also liable to pay interest on the loan they received. So, while in the Profit & Loss A/c the assessee company is debiting the interest payable by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar expense is debited which actually not been incurred. On the other hand, it is not evident that a particular income is credited which actually not been earned, as claimed by the representatives of the assessee. In view of the above, the explanation furnished by the A/R as well as the Accounts Officer, justifying the amount debited under the head of other borrowing cost, is found to be not acceptable, hence rejected. Accordingly, the amount of Rs. 1,12,80,692/- is disallowed as bogus expense claimed and being added back to the total income. Penalty proceedings u/s 271(1)(c) initiated separately for furnishing of inaccurate particulars of income." 4.2 In appeals, the Ld. CIT(A) upheld the disallowance of Rs. 1,12,80,692/- made in both yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel prayed for deletion of the disallowance of interest expenditure of Rs. 1,12,80,692/- in both years. 6. The Ld. Senior Departmental Representative (hereinafter, the 'Sr.DR') placing reliance on the finding of the AO and Ld. CIT(A), prayed for dismissal of the appeal. 7. We have heard both the parties and have perused the material available on record. We do find merit in the submission/contention/argument of the ld. Counsel that the assessee is bound to record the interest payable on loans taken from the UP Government as the assessee has followed mercantile system of accounting. The appropriation of the loan here will not determine the allowability of interest expenditure as the AO has not commented on the fact that the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
