ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, BELLARY vs. TUNGABHADRA STEEL PRODUCTS LTD, HOSPET

Per Chandra Poojari, Accountant Member

“1. The order of the learned Commissioner of Income-tax (Appeals) is opposed to law and facts of the case.

2. In the facts and circumstances of the case, the ld. CIT(A), has erred in directing to allow the claim of the assessee company on account of interest provisions on loan obtained from Govt. of India ignoring the fact that the assessee company itself has worked out such liability on provisional basis.

3. In the facts and circumstances of the case, the Id. CIT(A), has erred in holding that disallowance made by the A.O. on account of interest liability to Govt. of India is not accordance with the law ignoring the fact that the assessee company has been declared as sick company since 04.08.2005 and has filed application under BIFR and thus, there is no intention of the assessee company to pay interest to Govt. of India debited to the profit and loss account. 4. In the facts and circumstances of the case, the Id. CIT(A), has erred in directing to allow the claim of the assessee company on account of interest due on loan obtained from Govt. of India ignoring the fact that the assessee company has not paid any interest to the Govt. of India since long time. 5. In the facts and circumstances of the case, the Id. CIT(A), has erred in holding that disallowance made by the A.O. on account of interest liability to Govt. of India is not covered under the provisions of section 43B of the Act ignoring the fact that the Assessing Officer has not invoked the provisions section 43B of the Act while disallowing the claim of assessee on account of interest provisions on loan obtained from Govt. of India.” 4. We have heard both the parties and considered the material on record. Similar issue came up for consideration in assessee’s own case for the AY 2006-07 in before the Tribunal and vide order dated 27.10.2017 the Tribunal observed as follows :-

“We have heard the learned Departmental Representative and considered the relevant material on record. The assessee company has not paid interest towards the Govt. of India loan of Rs.12,71,90,551 but has debited the same on provisional basis. The Assessing Officer disallowed the interest on the ground that the assessee had no intention to pay interest liability to Govt. of India and further when the interest was not actually paid then as per the provisions of Section 43B, the same is not allowable. On appeal, the CIT (Appeals) has deleted the addition made by the Assessing Officer in para 4.1.1 as under :

Thus it is clear that the assessee has not written off the liability but it is showing in the books of accounts as liability payable to Govt. of India. Further the interest does not fall under the provisions of Section 43B and therefore we do not find any error or illegality in the impugned order of the CIT (Appeals) qua this issue.”

Pronounced in the open court on this 12th day of July, 2021.