DCIT, CHENNAI vs. M/S. MEDICLONE BIOTECH PVT. LTD., CHENNAI

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ITA 2525/CHNY/2016Status: DisposedITAT Chennai12 July 2017AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that interest payments to the Department of Bio-Technology and Department of Science & Technology are not covered under Section 43B as these are not public financial institutions or scheduled banks. The Tribunal also found that the cash credit was adequately explained as a loan from the director.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting disallowance of interest expenses claimed by the assessee and deleting an addition made on account of a cash credit. The interest was payable to government departments, and the cash credit was explained as a loan from the assessee's director.

What were the issues?

Whether interest payable to government departments is disallowable under Section 43B and whether a cash credit from a director is to be added under Section 68.

Which sections of the Income-tax Act were involved?

Section 43B,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: SHRI GEORGE MATHAN, & SHRI A. MOHAN ALANKAMONY

Hearing: 12.07.2017

आदेश / O R D E R

PER GEORGE MATHAN, JUDICIAL MEMBER:

1.

the Order of Commissioner of Income Tax (Appeals)-8, Chennai, in dated 21.06.2016 for the AY 2012-13.

ITA No.2525/Mds/2016 :- 2 -:

2.

Smt. R. Rajeswari, JCIT, represented on behalf of the Revenue and Shri K. Ravi, Adv., represented on behalf of the assessee.

3.

It was submitted by the Ld.DR that there are two issues in the Revenue’s appeal.

The first issue against the action of the Ld.CIT(A) in deleting the disallowance made by the AO by invoking the provisions of Sec.43B of the Act. It was a submission that the assessee had claimed interest expenses payable to the government departments on the loans taken from them being the Department of Bio-Technology, to an extent of Rs.11,33,300/- and Department of Science & Technology, to an extent of Rs.30,66,000/-.

It was a submission that as the said interests were not actually paid, the AO by invoking the provisions of Sec.43B of the Act had disallowed the same. It was a submission that the Ld.CIT(A) had allowed the same, holding that the interest payments due to the Department of Bio- Technology and the Department of Science & Technology, Government of India, were payments to the government, which were not covered by the provisions of Sec.43B(d) of the Act. It was a submission that the order of the Ld.CIT(A) was liable to be reversed on this issue.

It was a submission that the second issue was against the action of the Ld.CIT(A) in deleting the addition made by the AO by invoking the provisions of Sec.68 of the Act in respect of the amount of Rs.2,50,000/-

ITA No.2525/Mds/2016 :- 3 -: credited to the assessee’s bank account. It was a submission that the Ld.CIT(A) had deleted the same, holding that the source of the credit was explained as being from the Director of the assessee’s company. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

4.

In reply, the Ld.AR submitted that in respect of the first issue the interest payments were due to the Department of Bio-Technology and the Department of Science & Technology, which did not fall within the provisions of Sec.43B of the Act. It was a further submission that in respect of the second issue, the amounts represented the funds collected by the Director of the assessee company and deposited into the bank account of the assessee. He vehemently supported the order of the Ld.CIT(A).

5.

We have considered the rival submissions. In respect of the issue of the disallowance u/s.43B, a perusal of the facts in the assessee’s case clearly shows that, the interest payments are due to the Department of Bio-Technology and the Department of Science & Technology, which are basically Departments operating under Government of India. The said Departments are not public financial institutions nor/or scheduled banks.

This being so, the provisions of Sec.43B does not apply in respect of the said interest liability. This being so, we find no error in the order of the Ld.CIT(A) on this issue.

ITA No.2525/Mds/2016 :- 4 -:

6.

In respect of the issue of the cash credit of Rs.2,50,000/-, a perusal of the Assessment Order clearly shows that the AO was well aware that the amount of Rs.2,50,000/- out of the loan of Rs.3,24,800/- raised by the Director of the assessee company. A perusal of the order of the Ld.CIT(A) shows that, the Ld.CIT(A) has considered the facts giving rise to the deposit of Rs.2,50,000/- was in the assessee’s bank account out of the loan taken by the Director. This being so, we are of the view that the findings arrived by the Ld.CIT(A) is on a right footing and does not called for any interference.

7.

In the result, the appeal filed by the Revenue is stands dismissed.

Order pronounced in the Open Court on July 12, 2017, at Chennai.

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