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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Sh. Satbeer Singh Godara & Sh. Manish Agarwal
Asstt. Year: 2023-24 ACIT, Vs Dewan Sugars Ltd., Circle-7(1), Bypass Road, Partapur, New Delhi-110002 Meerut, U.P.-250103 (APPELLANT) (RESPONDENT) PAN No. AAACD3465H Assessee by : Sh. Divya Chadha, CA Revenue by : Ms. Amisha S. Gupt, CIT-DR Date of Hearing: 04.12.2025 Date of Pronouncement: 04.12.2025 ORDER
Per Satbeer Singh Godara, Judicial Member:
This Revenue’s appeal for Assessment Year 2023-24, arises against the Addl./JCIT(A)-6, Chennai’s DIN & order No. ITBA/APL/S/250/2024-25/1074089550(1) dated 06.03.2025, in proceedings u/s 143(1) of the Income Tax Act, 1961.
Heard both the parties at length. Case file perused.
This Revenue’s appeal raises the following substantive grounds: “1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing the appeals of the assessee by deleting the addition made by the CPC amounting to Rs.68,83,13,581/- on account of disallowance u/s 43B of the Act in any proceeding previous year but allowable during the previous year?”
Dewan Sugars Ltd. 4. We next note with the able assistance coming from both the parties that the learned CIT(A) has reversed the Assessing Officer’s action invoking section 43B disallowance in the assessee’s case amounting to Rs.76,51,32,853/- in section 143(1) processing dated 03.05.2024; reading as under:
“4. Decision: 4.1 The appeal has been filed against the order of the DCIT, CPC u/s 143(1) dated 03/05/2024. On 30-10-2023, the appellant filed return declaring income of Rs.28,73,74,310/-. The said return was further revised on 31-12-2023 declaring income of Rs.28,33,08,030/-. The AO, in his intimation u/s 143(1) added a sum of Rs. 76,51,32,853/- as proposed adjustment to total income creating a demand against the assessee amounting to Rs.12,74,07,270/-. Aggrieved, the present appeal has been filed, raising two grounds. 4.2 On the issue of Disallowance of Rs.76,51,32,853/- on account of “Any amount disallowed under section 43B in any preceding previous year but allowable during the previous year.”, the appellant avers that the total amount of Rs.76,51,32,853/- claimed in the income tax return as “Any amount disallowed under section 43B in any preceding year but allowable during the previous year” has been claimed in 2 limbs. The details are hereunder: Nature of Outstanding Amount Amount Written Opening Balance paid/set off back to the Profit Liability not allowed in during the year and Loss earlier previous Account years COLUMN 1 COLUMN 2 COLUMN 3 Bonus 196735 96967 Leave Encashment 253640 244709 Payable Interest to Fl/Banks: PICUP 434634569 38357666 396276903 ALLAHABAD BANK 45366962 38119930 7247032 The The The amount amount amount claimed claimed claimed by by by the the the assessee assessee assessee company company company i.e. i.e. i.e. Rs.76,51,32,853/ Rs.76,51,32,853/- is the aggregate of Columns 2 and 3 aggregate of Columns 2 and 3 above. In respect of the amount of Rs. 7,68,19,272/ In respect of the amount of Rs. 7,68,19,272/- claimed by claimed by the appellant that it was paid during the FY 2022 the appellant that it was paid during the FY 2022-23, the appellant that it was paid during the FY 2022 appellant appellant appellant avers avers avers that that that The The The fact fact fact of of of payment payment payment of of of Rs.7,68,19,272/- - has been verified and duly certified by has been verified and duly certified by the Tax Auditors of the company in their Tax Audit Report Auditors of the company in their Tax Audit Report Auditors of the company in their Tax Audit Report at Point No.
26. Relevant extract of the Tax Audit Report at Point No.
26. Relevant extract of the Tax Audit Report at Point No.
Relevant extract of the Tax Audit Report is filed in response to the notices u/s 250. is filed in response to the notices u/s 250. 4.3 The averments have been considered. In the tax The averments have been considered. In the tax The averments have been considered. In the tax audit audit audit report, report, report, the the the auditor auditor auditor has has has certified certified certified that that that Rs. Rs. Rs. 7,68,19,272/- was paid during the FY 2022 was paid during the FY 2022-23. The 23. The relevant extract of the report is given below: relevant extract of the report is given below:
Dewan Sugars Ltd. From the above, it is seen that the amount of Rs.7,68,19,272/- was paid during the FY 2022-23. Hence the addition of Rs.7,68,19,272/- is deleted. Appellant has further submitted that the appellant company had outstanding loans from Indian Bank (Formerly Allahabad Bank), PICUP Ltd. and SASF. That, further, during the year under consideration, the appellant company entered into One Time Settlement (hereinafter referred to as “OTS”). As per the terms of the OTS the appellant company made the following payments to the 3 financial institutions as detailed hereunder: Calculation of Opening Principal & Interest Amount Written Off during the Year F.Y. 2022-2023 Indian Bank SASF PICUP (Formerly Allahabad Bank) Balance O/s as on 31.03.2023 76,957,102 284,789,646 499,634,569 Less: Allahabad Bank Refund A/c Dr. 9,672,202 0 0 Balance 67,284,900 284,789,646 499,634,569 Less: Bank Guarantee Margin - FDR 203,000 0 0 67,081,900 284,789,646 499,634,569 Break up of Opening Balance Principal 21,714,938 0 65,000,000 Interest 45,366,962 284,789,646 434,634,569 Total of Opening Balance 67,081,900 284,789,646 499,634,569 Add: Interest during the year 2,986,132 0 23,137,077 Total to Pay 70,068,032 284,789,646 522,771,646 Payments Paid during the year current Interest 2,986,132 0 23,137,077 Paid during the year old Interest 38,119,930 0 38,357,666 Paid during the year Principal 21,714,938 0 65,000,000 Paid during the year 62,821,000 0 126,494,743 Amount to be Written Off (in Old Intt.) 7,247,032 284,789,646 396,276,903 On the basis of the OTS entered into by the appellant company with the 3 financial institutions, an aggregate amount of Rs.68,83,13,581/- (7247032 + 284789646 + 396276903) was written off and credited by the appellant company in its books under the head “Other Income” and the said amount was credited to the Profit & Loss compiled for the year under consideration.
Dewan Sugars Ltd. The appellant company has The appellant company has submitted the certified copy of submitted the certified copy of “Statement of Profit and Loss for the year ended 31st “Statement of Profit and Loss for the year ended 31st “Statement of Profit and Loss for the year ended 31st March March March 2023” 2023” 2023” disclosing disclosing disclosing ‘Other ‘Other ‘Other Income’ Income’ Income’ at at at Rs.722,945,729/ Rs.722,945,729/- which forms part of this submission as which forms part of this submission as along with the schedule of ‘Other Income’ which very along with the schedule of ‘Other Income’ which very along with the schedule of ‘Other Income’ which very clearly reveals that clearly reveals that an amount of Rs.688313581/ an amount of Rs.688313581/- has been credited to other income on account of “Amount been credited to other income on account of “Amount been credited to other income on account of “Amount written off on OTS of Term Loans”. The certified copies of written off on OTS of Term Loans”. The certified copies of written off on OTS of Term Loans”. The certified copies of P & L account and relevant schedule is reproduced P & L account and relevant schedule is reproduced P & L account and relevant schedule is reproduced hereunder:
The appellant in its submission relies upon The appellant in its submission relies upon the following the following case law:
1. 1. CIT vs. SAMUDRA SHOE OVERSEAS LTD. (MADRAS CIT vs. SAMUDRA SHOE OVERSEAS LTD. (MADRAS CIT vs. SAMUDRA SHOE OVERSEAS LTD. (MADRAS HIGH COURT) TCA NO. 349 OF 2016 (COPY OF JUDGEMENT HIGH COURT) TCA NO. 349 OF 2016 (COPY OF JUDGEMENT HIGH COURT) TCA NO. 349 OF 2016 (COPY OF JUDGEMENT IS SUBMITTED).
2. DCIT vs. K.S.DIESELS LTD (ITAT, MUMBAI) vs. K.S.DIESELS LTD (ITAT, MUMBAI) vs. K.S.DIESELS LTD (ITAT, MUMBAI) (COPY OF JUDGEMENT IS SUBMITTED). 599/MUM/2019 (COPY OF JUDGEMENT IS SUBMITTED). 599/MUM/2019 (COPY OF JUDGEMENT IS SUBMITTED). In the case of DCIT vs In the case of DCIT vs. K.S. Diesels Ltd., the Hon’ble , the Hon’ble Members of the ITAT, Mumbai have held as under: Members of the ITAT, Mumbai have held as under: “We have deliberated at length on the issue in hand and “We have deliberated at length on the issue in hand and “We have deliberated at length on the issue in hand and find that the controversy involved in the present case the controversy involved in the present case the controversy involved in the present case hinges around the maintainability of the assessee"s claim hinges around the maintainability of the assessee"s claim hinges around the maintainability of the assessee"s claim for deduction of interest of Rs. 3,23,84,509/ eduction of interest of Rs. 3,23,84,509/- (supra). It is (supra). It is the claim of the assessee that as the aforesaid interest the claim of the assessee that as the aforesaid interest the claim of the assessee that as the aforesaid interest aggregating to Rs.3,23,84,509/ aggregating to Rs.3,23,84,509/- was not actually paid by was not actually paid by it in the years to which they pertained i.e A.Y 2002 it in the years to which they pertained i.e A.Y 2002-03 to it in the years to which they pertained i.e A.Y 2002 A.Y 2008-09, therefore, wh 09, therefore, while computing its income for the ile computing its income for the said respective years it had suo motto disallowed the same said respective years it had suo motto disallowed the same said respective years it had suo motto disallowed the same as per the mandate of Sec. 43B of the Act. We may herein as per the mandate of Sec. 43B of the Act. We may herein as per the mandate of Sec. 43B of the Act. We may herein observe, that as held by the CIT(A), and rightly so, as the observe, that as held by the CIT(A), and rightly so, as the observe, that as held by the CIT(A), and rightly so, as the assessee had after OTS paid interest of Rs. 1,9 assessee had after OTS paid interest of Rs. 1,91,19,083/ 1,19,083/- during the year under consideration and not the entire during the year under consideration and not the entire during the year under consideration and not the entire amount of Rs.3.23,84,509/ amount of Rs.3.23,84,509/-, interest/part thereof in a , interest/part thereof in a subsequent year in which the same had been waived under subsequent year in which the same had been waived under subsequent year in which the same had been waived under OTS would result to a double taxation of the said amount. OTS would result to a double taxation of the said amount. OTS would result to a double taxation of the said amount. Our aforesaid view is Our aforesaid view is fortified by the judgment of the fortified by the judgment of the Hon”ble High Court of Madras in the case of CIT VS. M/s Hon”ble High Court of Madras in the case of CIT VS. M/s Hon”ble High Court of Madras in the case of CIT VS. M/s Samudra Shoe Overseas Ltd, TCA No. 349 of 2016, dated Samudra Shoe Overseas Ltd, TCA No. 349 of 2016, dated Samudra Shoe Overseas Ltd, TCA No. 349 of 2016, dated 06.06.2016. It was observed by the Hon"ble High Court 06.06.2016. It was observed by the Hon"ble High Court 06.06.2016. It was observed by the Hon"ble High Court Dewan Sugars Ltd. that the interest payable by the assessee to the financial institution which was earlier disallowed u/s 43B of the Act was eligible as a deduction on the waiver of such interest by the bank in One Time Settlement (OTS).
Backed by the facts involved in the case before us, we are of the considered view that as the assessee as per the terms and conditions of the OTS had during the year under consideration made a payment of interest of Rs.1,91,19,083/- to GIIC out of the interest of Rs.3.23,84,509/- (supra) that was disallowed u/s 43B in the said earlier years, therefore, such sum so actually paid would be eligible as a deduction during the year under consideration u/s 43B of the Act. As regards the balance amount of interest of Rs.1,32,65.426/- (Rs.3,23,84,509/- (-) Rs.1,91,19,083/-], we concur with the view taken by the CIT(A) that if the said amount was disallowed u/s 43B in the earlier years and had been credited by the assesee company in its Profit and loss account for the year under consideration on account of waiver of interest income payable to GIIC, then, the claim of the assessee for deduction of such amount in its computation of income is in order. We, thus, in terms of our aforesaid observations find no infirmity in the view taken by the CIT(A) who had directed the A.O to carry out certain verifications, viz, (i). that the interest waived was credited in the profit & loss a/c of the assessee company for the year under consideration; and (ii). that the interest waived had been included in the figure of „Profit" as per the profit & loss a/c taken to the computation of income; and (iii).that such interest payable to GIIC was disallowed u/s 43B in the earlier years. Accordingly, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) we uphold his order in terms of our aforesaid observations.” Accordingly, the AO is directed to carry out the following verifications: (i) that the interest waived was credited in the profit & loss a/c of the assessee company for the year under consideration; (ii) that the interest waived had been included in the figure of “Profit” as per the profit & loss a/c taken to the computation of income; and (iii) that such interest payable to the Banks was disallowed u/s 43B in the earlier years.
Dewan Sugars Ltd. Considering the case law referred by the appellant and submission made by it, this ground is allowed. The second ground being general in nature is not being adjudicated. 5. In the result, the appeal is allowed.”
4.1 We make it clear that the Revenue’s sole endeavour in the instant appeal is to revive the above latter component amounting to Rs.68,83,13,581/- arising from the assessee’s onetime settlement of term loans with various banks and financial institutions declared as “Account written off as OTS of term loans”.
That being the case, learned CIT-DR vehemently argues that the CPC’s impugned processing had rightly invoked section 43B of the Act to conclude that the impugned sum could not be allowed as a business deduction on actual payment. She could hardly dispute that the instant sole issue already stands decided in the assessee’s favour and against the department in various judicial precedents (supra) that such a onetime settlement amount written off indeed qualifies as a business deduction in the relevant financial year. This is indeed coupled with the fact that the learned CIT(A) has still directed the Assessing Officer to verify all the relevant facts whilst finalizing his consequential computation. We thus find no merit in the Revenue’s instant sole substantive ground which stands rejected therefore.