ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, BELLARY vs. TUNGABHADRA STEEL PRODUCTS LTD, HOSPET
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the CIT(Appeals)'s decision, finding no error in allowing the interest claim. It noted that the interest liability was shown as payable and did not fall under Section 43B of the Income Tax Act.
What were the facts?
The revenue appealed against the CIT(Appeals)'s order allowing the assessee's claim for interest on a loan from the Government of India. The Assessing Officer had disallowed this claim, citing the assessee's declared sick status and lack of intention to pay interest.
What were the issues?
Whether interest on a government loan, debited provisionally and not paid, is allowable as a deduction when the assessee is declared a sick company. Whether such interest falls under the purview of Section 43B.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI GEORGE GEORGE K.
Per Chandra Poojari, Accountant Member
This appeal by the revenue is directed against the order of the CIT(Appeals), Gulbarga dated 29.11.2017 for the assessment year 2008-09.
None appeared for the assessee-respondent at the time of hearing. However, we proceed to dispose of the appeal after perusing the material on record and hearing the ld. DR.
The revenue has raised the following grounds:-
“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.”
We therefore do not find infirmity in the order of CIT(Appeals) in deleting the addition made on account of disallowance of interest on loans due to Govt. of India. We uphold the order of the CIT(Appeals) to this extent.
In the result, the appeal by the revenue is dismissed.
Pronounced in the open court on this 12th day of July, 2021.
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