Loan interest addition appeal allowed for statistical purposes; excess depreciation claim appeal dismissed.

The appeal regarding the addition of interest on the loan was allowed for statistical purposes, with instructions to the AO to reconsider the issue based on the Government of West Bengal's confirmation. The appeal regarding the excess depreciation claim was dismissed, upholding the CIT(A)'s decision to allow the depreciation based on previous ITAT orders.

---

---

Issues Involved:
1. Addition of interest on loan from the Government of West Bengal.
2. Allowability of excess depreciation claimed based on previous ITAT orders.

Issue 1: Addition of Interest on Loan from the Government of West Bengal

The assessee appealed against the addition of Rs. 5,37,34,000 as interest on a loan from the Government of West Bengal, which was sustained by the CIT(A). The core issue was whether the interest, pending determination of the rate, could be added to the income. The assessee argued that the interest provision was made at an estimated rate of 6.25% p.a. because the exact rate had not been communicated by the government. The financial statements, audited by the CAG and statutory auditors, did not object to this provision. However, the AO disallowed the interest, stating it was an unascertainable liability and therefore not allowable under the Income Tax Act. The CIT(A) upheld this view, noting that the loan terms did not specify interest and no actual payment or demand for interest had been made. The CIT(A) emphasized that any expenditure on an estimate basis for an unascertainable liability is not deductible.

On appeal, the assessee's counsel requested a remand to the AO, pending confirmation from the Government of West Bengal regarding the interest rate. The Tribunal agreed, directing the AO to reconsider the issue based on the government's confirmation.

Issue 2: Allowability of Excess Depreciation Claimed

The Revenue appealed against the CIT(A)'s decision to allow excess depreciation of Rs. 4,21,61,956, which was based on an ITAT order for the Assessment Year 2002-03. The AO had disallowed this depreciation, arguing that the issue was under appeal before the Calcutta High Court and had not reached finality. The CIT(A) allowed the depreciation, stating that the tribunal's order was operational and effective unless reversed by the High Court. The Tribunal upheld the CIT(A)'s decision, emphasizing judicial discipline and consistency with previous years' orders. The Tribunal directed the AO to allow the depreciation claim in line with the ITAT's earlier decisions.

Conclusion:

1. The appeal regarding the addition of interest on the loan was allowed for statistical purposes, with instructions to the AO to reconsider the issue based on the Government of West Bengal's confirmation.
2. The appeal regarding the excess depreciation claim was dismissed, upholding the CIT(A)'s decision to allow the depreciation based on previous ITAT orders.

---