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Facts
The assessee, a public sector undertaking engaged in mining and wind power generation, filed its return for AY 2024-2025. An adjustment of Rs. 163,93,26,769/- was made by CPC on account of a mismatch in expenditure claimed under Section 43B of the Income Tax Act. The CIT(A) granted partial relief, deleting Rs. 78,01,08,715/- and confirming the disallowance of Rs. 85,72,18,054/-.
Held
The Tribunal held that while the entire amount of Rs. 1,53,93,26,769/- may qualify as business expenditure, its allowability is governed by Section 43B, which requires actual payment before the due date of filing the return. Only Rs. 78,01,08,715/- was found to be actually paid, while Rs. 85,92,18,054/- was an adjustment entry, not an actual payment.
Key Issues
Whether the disallowance of Rs. 85,92,18,054/- under Section 43B of the Income Tax Act is justified when the amount was adjusted against receivables rather than being an actual payment.
Sections Cited
43B, 143(1)(a), 139(1)
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the Order dated 29.07.2025 of the learned Addl./JCIT(A)-2, Surat, for the assessment year 2024-2025.
The assessee has raised the following grounds in the appeal:
2 ITA.No.1523/Hyd./2025 1. “The Learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in law and facts of the case while passing the appellate order upholding the denial of deduction claimed by the appellant u/s 43B of the Income Tax Act, 1961 (Act).
2. The Learned CIT(A) erred in concluding that the amount of Rs. 85,92,18,054/- is unpaid merely on the basis that the same is settled by way of adjustment ignoring that the adjustment is made against the amount becoming receivable (on final assessment) out of actual payments made earlier and therefore in substance this adjustment is equivalent to actual payment.
The appellant craves leave to add, alter, DLEETE any of the grounds as seemed necessary on OR before the appeal is heard.”
The assessee is a public sector undertaking 3. engaged in the business of mining and iron ore, diamonds and in generation and sale of wind power. The assessee filed its return of income on 29.11.2024 declaring total income of Rs.8614,64,60,700/-. The return was processed u/sec.143(1)(a) by the CPC on 16.04.2025 whereby an adjustment of Rs.163,93,26,769/- was made on account of mismatch of expenditure claimed as per the provisions of sec.43B of the Income Tax Act [in short "the Act"], 1961. The assessee challenged the disallowance made by the CPC before the learned CIT(A). The learned CIT(A) has given part relief to 3 ITA.No.1523/Hyd./2025 the assessee to the extent of Rs.78,01,08,715/- and confirmed the disallowance of Rs.85,72,18,054/-.
Aggrieved by the impugned order of the learned CIT(A) the assessee has filed the present appeal before the Tribunal.
Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that the adjustment was made by the CPC on account of particular claim of payment of royalty to the State which was partly allowed by the learned CIT(A) to the extent of Rs.878,01,08,715/- by considering the fact that the assessee has made the actual payment before the due date of filing of return of income. However, the learned CIT(A) has confirmed the balance disallowance on the ground that the assessee has shown the payment through the book entries which is not actual payment. The learned Authorised Representative of the Assessee has submitted that the assessee has produced all the relevant record to show that initially the royalty was paid to the State on adhoc basis and once the royalty was determined by the Authorities of the State the excess 4 ITA.No.1523/Hyd./2025 payment made initially was adjusted against the royalty due to the States. He has referred to various Orders passed by the Mineral Superintendent determining the liability of the assessee towards the royalty payment and submitted that in all these years royalty payable to the State was shown in negative as excess royalty was already paid by the assessee to the State and therefore, it amounts to actual payment of royalty rather pre-payment of royalty and hence, the said claim of the assessee cannot be disallowed. The learned Authorised Representative of the Assessee has thus, submitted that the learned CIT(A) has ignored the relevant record while confirming the addition to the extent of Rs.85,92,18,054/- out of the total disallowance made by the Assessing Officer/CPC to the tune of Rs.163,93,26,769/-. Thus, he has contended that when there was no payable on account of the royalty due to excess payment at the initial stage then, the claim of the assessee cannot be disallowed u/sec.43B of the Act.
On the other hand, the learned DR has submitted that the learned CIT(A) has given the finding of the fact in 5 ITA.No.1523/Hyd./2025 para nos.5.5 to 5.7 of the impugned order which clearly demonstrate that the claim of the assessee to the extent of Rs.85,92,18,054/- is not an actual payment but only book entries and therefore, the rigors of sec.43B are attracted. He has also relied upon the Order of this Tribunal dated 30.01.2026 in the case of DCIT, Circle-1(1), Hyderabad vs. Corteva Agriscience Services India Private Limited, Hyderabad in ITA.No.996/Hyd./2025. The learned DR relied upon the Orders of the authorities below.
We have considered the rival submissions as well as relevant material on record. The learned CIT(A) has considered this issue in para nos.5.5 to 5.7 as under:
“5.5. During the appellate proceedings, the appellant has submitted that it had made the payment after filing of tax audit report but before due date of filing of return of income and as per the provision of sec. 43B of the Act, sums payable during the previous year are deductible if paid on or before the ITR due date. Since the amount was paid subsequent to the date of filing of tax audit, the same was not considered by the auditor while filing the tax audit report. However, the payment was made before the due date of return of income. Further, the due date to file the tax audit report is one month prior to the due date of furnishing the return of income and in the present case the due date for filing of the tax audit report is 31.10.2024 and for filing the return of income is 6 ITA.No.1523/Hyd./2025 30.11.2024. Accordingly, the tax audit report was filed on 31.10.2024 and return of income was filed on 27.11.2024. In the Clause 26 of the tax audit report a disallowance amounting to Rs.4,57,60,72,841/- under section 438 is reported which is computed by considering the amounts paid till that date. Whereas in the return of income filed on 27.11.2024 the disallowance reported under section 43B amounts to Rs.2,93,67,46,072/- which is computed by considering the payment made till that date. The difference of Rs.163,93,26,769 is on account of the payments made in the intervening period. The appellant has also submitted details of head wise expenses of Rs.163,93,26,769/- in tabulated form in annexure-I, the same is reproduced hereunder.
5.6. On perusal of the above table and supporting documents, it is evident that during the year under consideration, the appellant made actual payments of Rs.78,01,08,715/-towards Royalty to the State Government. However, the balance 7 ITA.No.1523/Hyd./2025 expenditure of Rs.85,92,18,054/- were not paid but merely adjusted against receivables from the State Government by way of book entries. Consequently, a notice u/s. 250 of the Act was issued to the appellant, specifically requesting it to furnish whether actual payments were made on account of the said expenditure or just adjustment entries were made along with documentary evidences. In response to the same, the appellant submitted a copy of the bank account statement highlighting the payment transactions. On verification, it is observed that only the amount of Rs.78,01,08,715/- was actually paid during the year, and the remaining amount of Rs.85,92,18,054/- was merely adjusted and not paid through banking channels. 5.7. In my view, though the entire amount of Rs.1,53,93,26,769/- qualifies as business expenditure, its allowability is governed by the provisions of section 43B of the Act, which permits deduction only upon actual payment on or before the due date of filing the return of income u/s.139(1). Further, as only expenditure of Rs.78,01,08,715/- was actually paid during the year, which is prior to the due date for filing the return of Income for AY 2024-25 i.e. 30.11.2024 the same is allowable as deduction u/s.43B of the Act. The balance amount of Rs.85,92,18,054/-, being unpaid and merely adjustment entry, does not qualify the conditions as specified in the provisions of section 43B of the Act and is therefore not allowable for deduction for the year under consideration. Accordingly, out of the total disallowance of Rs.1,63,93,26,769/- made by the AO u/s.43B, the addition to the extent of Rs.78,01,08,715/- is hereby deleted, and the disallowance of Rs.85,92,18,054/- is sustained. In view of the above, the ground of appeal is partly allowed.”
8 ITA.No.1523/Hyd./2025 7.1. Thus, the learned CIT(A) has given details of the royalty payments as claimed by the assessee and in some of the transactions of the payment the assessee claimed that the payment of the royalty for the year under consideration was adjusted against the excess royalty already paid. The learned CIT(A) has disallowed the claim of the assessee to the extent of the amount which was claimed by the assessee as adjusted against the excess royalty already paid by the assessee to the State Authorities on the grounds that these are not actual payment but only book entries. The assessee has filed various Orders of the Superintendent of Minerals of State of Chattisgarh whereby the actual liability of the assessee is determined for the various half yearly assessment period, and a negative balance is shown being excess payment by the assessee at the time of self-payment on estimation basis. Neither the Assessing Officer nor the learned CIT(A) has verified and examined the actual payment made by the assessee on estimation basis which was lying with the State Government towards the royalty and thereafter, the assessee’s liability was determined in negative at the time of 9 ITA.No.1523/Hyd./2025 assessment. It is not a case of book entries of transfer of the liability to other persons but the assessee’s claim is that it has already paid the royalty in excess to the States and when the actual liability of the royalty is determined by the Authority a negative figure is arrived showing the excess payment of royalty by the assessee and therefore, the assessee was not required to make further payment towards royalty. Since these facts were not been neither considered nor verified by the authorities below as the case of the assessee was processed by the CPC and the learned CIT(A) has also not verified the relevant record as well as the correctness of claim of assessee that the initial payment of royalty is in excess to the actual liability of the assessee as determined by the Assessment Authority/Superintendent of Minerals of State. Accordingly, in the facts and circumstances of the case, we set aside the issue to the record of the Assessing Officer for proper verification and examination of the relevant facts as well as prior payment of royalty by the assessee which is found to be excess and adjusted against the payment for the year under 10 ITA.No.1523/Hyd./2025 consideration. Needless to say, the assessee be given an opportunity of hearing before passing the fresh order.
In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18.02.2026.
Sd/- Sd/- [MANJUNATHA G.] [VIJAY PAL RAO] ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 18th February, 2026. VBP Copy to : NMDC Limited, 10-3-311/A, Khanij Bhavan, 1. Castle Hills, Hyderabad – 500028. Telangana. The DCIT, Circle-5(1), 2nd Floor, B-Block, IT 2. Towers, AC Guards, Masab Tank, Hyderabad – 500 004. Telangana 3. The Pr. CIT, Hyderabad. 4. The DR, ITAT, “B” Bench, Hyderabad. 5. Guard file. BY ORDER
Digitally signed VADREVU by VADREVU PRASADA RAO PRASADA Date: RAO 2026.02.18 14:09:21 +05'30'