2012 (3) TMI 555 - AT - Income Tax

ITAT allows assessee's claim of 80,64,458/- under Section 37(1) for AY 1994-95

The Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee, permitting the claim of 80,64,458/- as allowable under section 37(1) of the ... - Issues Involved: Appeal against disallowance of penal interest amounting to 80,64,458/- u/s 37(1) of the Income Tax Act, 1961 for Assessment Year 1994-95.Issue 1: Disallowance of Penal InterestThe appellant, a Government Company providing long term finance for Industrial Projects, appealed against the disallowance of 80,64,458/- on account of penal interest. The Assessing Officer confirmed the addition as the appellant failed to provide evidence that the amount was penal interest. The CIT(A) upheld the decision. The appellant contended that the amount was waived as part of settlement with parties and should be allowed as revenue expenditure u/s 37(1) or as bad debts. The appellant submitted evidence including a journal voucher, highlighting the accounting practice followed consistently. The ITAT noted that the Assessing Officer had allowed a portion of the claim under section 37(1) and found the claim of penal interest similar in nature to the allowed amount. Despite lack of specific details, the ITAT held that the claim of 80,64,458/- was allowable under section 37(1), directing the Assessing Officer to verify any potential double claims or recoveries in subsequent years.Conclusion:The ITAT allowed the appeal of the assessee, permitting the claim of 80,64,458/- as allowable under section 37(1) of the Income Tax Act, 1961 for the Assessment Year 1994-95.