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Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
This appeal is preferred by the assessee against the order of the CIT(A), Meerut dated 26.09.2014 for the Assessment Year 2008-09 on the following grounds : “1. That on facts and in law disallowing interest accrued & due but not paid amounting to Rs.363,59,677/- u/s 43B(d) is totally wrong, unjustified and illegal. Interest accrued & due but not paid (Shakkar Vishesh Nidhi Rs. 30780700/- and State Govt loan Rs.5578977/- pertains to various institution of UP.Government and does not falls under the definition of Public Financial. Institutions/State Financial Institutions as defined under section 43B of the Act. In first appeal CIT (A) has restricted the addition to Rs.15,24,100/- as the amount actually charged in profit & loss account. Therefore, the basis taken for disallowing interest accrued & due but not paid of Rs.15,24,100/- pertains to institutions of U.P.Govt. is totally wrong, unjustified and unwarranted and the same deserves to be allowed in full.
ii) That the Public Financial Institutions and State Financial Institutions are clearly defined under section 43B of the Act read with section 4A of Companies Act, 1956. iii) That sub-section 1 & 2 of section 4A of Companies Act clearly mentioned what are the public financial institutions and state financial institutions for the purpose of section 43B of the Act. iv) That the financial institutions of UP. Government like Shakar Visesh Nidhi (SVN), State Government loan does not cover under section 4A(1) & 4A(2) of the Companies Act.”
The assessee is co-operative society engaged in the business of manufacturing of sugar. Assessee filed its return of income on 29th September 2008 declaring loss of Rs.02,09,67,250/-. It claimed deduction under section 80 P of the Income Tax Act, 1961 and assessment was completed at total loss of Rs.1,82,74,874/- on 27.12.2010. Subsequently, assessment was reopened u/s 147 of the Act and reasons recorded were that an interest of Rs.3,63,59,677/-on account of unsecured loans interest accrued and due but is not paid before the due date of filing of the return and therefore it is disallowable u/s 43B (d) of The Income Tax Act. Assessment was framed under section 147/143 (3) of The Acton 15/03/2013. Ld. AO disallowed the interest of Rs.3,63,59,677/-u/s 43B (d) of the act as discussed above. Aggrieved by this, assessee filed an appeal before CIT (A) who deleted the addition but confirmed the disallowance of Rs.15,24,100/– holding that this is the amount of interest which is being charged to the profit and loss account for the year and disallowance is required to be restricted to that extent. Against the order of CIT (A) assessee has preferred this appeal.
Before us learned AR contended that assessee is running a sugar mill, which is a unit of Uttar Pradesh government and is controlled by Uttar Pradesh co-operative Sugar Federation Ltd. Assessee has taken several loan from the Uttar Pradesh government and one of which is the Shakar Vishesh Nidhi loan which is payable to Government of Uttar Pradesh. For the Year amount of interest accrued and due but not paid is Rs.1524100/- only pertaining to Sakhar Videsh Nidhi Loan. He submitted that this interest is payable to Government and therefore provisions of section 43B (d) does not apply to it. For this he relied on decision of ITAT Delhi benches in case of Bhagpat co-operative Sugar Mills Ltd A.Y. 2007–08 dated 07–08–2015 wherein it has been held that provisions of section 43B (d) are not applicable in the case of interest payable to institutions of government of India and UP government. He, therefore, submitted that this being a covered issue in favor of the assesse, the addition may be deleted.
Ld. D. R. Relied on the order of lower authorities.
We have carefully considered the rival contentions. Assessee that accumulated amount of interest accrued and due but not paid to various unsecured loan and therefore the provisions of section 43(d) was invoked by the Ld. AO. However out of Rs.3,63,59,677/– only Rs.15,24,100/- has been charged to the profit and loss account on account of interest accrued and due butnot paid. In view of this CIT (A) restricted the disallowance to Rs.15,24,100/- only. In ITA No.6157/DEL/2012 for assessment year 2007–08 in para number of 7 of the order it is held that if the interest in question is payable to Government of India and Uttar Pradesh government, section 43B (d) does not apply. No other contrary decision was brought to our notice. In view of this, following the decision of coordinate bench, we reverse the finding of CIT(A) confirming the disallowance u/s 43B(d) of Rs.1524100/-.