ACIT, MUMBAI vs. IMP POWERS LIMITED, MUMBAI

ITA 4982/MUM/2025Status: DisposedITAT Mumbai30 September 2026AY 2012-137 pages
AI SummaryDismissed

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2012-13. The assessee, IMP Powers Limited, engaged in transformer business, had debited Rs.14,77,05,947/- as interest expenditure, including Rs.4,43,50,000/- related to a Corporate Debt Restructuring (CDR) scheme. Of this CDR interest, 25% was paid in cash, and 75% was converted into 1% Cumulative Redeemable Preference Shares, amounting to Rs.3,32,62,140/-. The Assessing Officer disallowed this Rs.3,32,62,140/- as interest expenditure under section 43B, holding it was capitalized rather than paid. The CIT(A) deleted this disallowance, following the Tribunal's decision in Garware Chemicals Ltd. The Revenue's appeal challenges this deletion.

What did the Tribunal hold?

The Tribunal held that the order of the learned CIT(A) deleting the disallowance of Rs.3,32,62,140/- made under section 43B of the Act was not to be interfered with. The reasoning was based on the principle that the mere pendency of a Special Leave Petition (SLP) before the Hon'ble Supreme Court does not obliterate the precedential value of a High Court judgment. The Tribunal noted that the Hon'ble Karnataka High Court in Commissioner of Income-tax (LTU) v. Biocon Ltd. had affirmed the Special Bench decision in Biocon Ltd., answering the questions of law against the Revenue. Although the Revenue had filed an SLP and notice was issued, no final judgment reversing or modifying the High Court's decision had been rendered. In the absence of any stay, reversal, or modification by the Supreme Court, the High Court's judgment continues to hold the field. Therefore, respectfully following the judgment of the Hon'ble Karnataka High Court, the Tribunal found no infirmity in the CIT(A)'s order. The grounds raised by the Revenue were dismissed. The disallowance made by the Assessing Officer was directed to be deleted.

What were the issues?

1. Whether the conversion of interest payable into preference shares under a CDR scheme constitutes payment of interest for the purposes of Section 43B(d) of the Income-tax Act, 1961, thereby allowing its deduction. Assessee's contentions: - The learned CIT(A) correctly deleted the disallowance by following the decision in Garware Chemicals Ltd. v. DCIT, Mumbai. - As of the date of the hearing, the judgment of the Hon'ble Karnataka High Court in Commissioner of Income-tax (LTU) v. Biocon Ltd. holds the field, and the mere pendency of a Special Leave Petition (SLP) before the Hon'ble Supreme Court does not negate its precedential value. - The Hon'ble Supreme Court has not rendered any decision reversing or modifying the High Court's judgment. Revenue's contentions: - The learned CIT(A) erred in allowing the assessee's claim and treating the conversion of interest liability into preference shares as sufficient compliance with Section 43B. - The issue is covered by the Special Bench decision in Biocon Ltd. v. Dy. CIT, which was affirmed by the Hon'ble Karnataka High Court and is now pending before the Hon'ble Supreme Court. Therefore, the CIT(A)'s order should be interfered with.

Which sections of the Income-tax Act were involved?

Section 43B,Section 250,Section 143(1),Section 147,Section 148,Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI CHALLA NAGENDRA PRASAD & SHRI G. M. DOSS

Pronounced: 30.09.2026

PER G.M. DOSS, ACCOUNTANT MEMBER :

This appeal has been filed by the Revenue against the order dated 23.06.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“the learned CIT(A)”], under section 250 of the Income-tax Act, 1961, for the assessment year 2012-13. 1 Ms. IMP Powers Limited

2.

The assessee is a company engaged in the business of trading, manufacturing and repair of transformers and meters. For the assessment year under consideration, the assessee filed it

The order continues below.

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