1999 (9) TMI 117 - AT - Income Tax

Appeal partially allowed in tax case: Interest deletion for prior years upheld, loan use and green leaves decisions affirmed.

The Tribunal partially allowed the appeal, ruling in favor of the Revenue on the deletion of interest amount on account of earlier years. However, the ... Business Expenditure Issues:1. Deletion of interest amount on account of earlier years.2. Deletion of interest on loan not utilized for business purposes.3. Addition on account of apportionment of green leaves.Issue 1: Deletion of interest amount on account of earlier years:The Revenue appealed against the CIT(A)'s decision to delete Rs. 42,27,001 on account of interest pertaining to earlier years. The Assessing Officer disallowed the amount as it related to earlier years and did not pertain to the relevant accounting period. However, the CIT(A) allowed the deletion based on the appellant's submission that an interim injunction prevented interest charges for a specific period in 1988. The appellant argued that the liability for interest arose during the previous year relevant to the assessment year in question. The Tribunal disagreed with the CIT(A) and held that the interest deduction was not allowable in the year under appeal as the suit filed by the bank was still pending, and the interest could not be claimed until its finality was determined. The Tribunal referred to legal precedents emphasizing that income accrues only when it is legally recoverable, and in this case, the interest deduction was contingent on the outcome of the pending suit. Therefore, the Tribunal reversed the CIT(A)'s decision and upheld the Assessing Officer's findings.Issue 2: Deletion of interest on loan not utilized for business purposes:The appeal also raised a concern regarding the deletion of interest on a loan that was not utilized for the business's purpose. The Revenue relied on specific court decisions, while the appellant cited a previous ITAT decision in their favor. The Tribunal found that the case laws cited by the Revenue were not applicable in this scenario. Referring to the ITAT's previous decision in the appellant's case for other assessment years, the Tribunal upheld the deletion of interest by the CIT(A) as it was consistent with the earlier ruling. Therefore, the Tribunal dismissed the Revenue's ground on this issue.Issue 3: Addition on account of apportionment of green leaves:The last ground of appeal concerned the addition of Rs. 18,15,609 due to the apportionment of green leaves. The Assessing Officer's apportionment was challenged by the appellant, leading to the CIT(A) directing the Assessing Officer to accept the basis adopted in earlier years. The Revenue disputed this decision, but the Tribunal, after considering the arguments and records, agreed with the CIT(A) and the appellant's submission. The Tribunal found no compelling reason to unsettle a settled issue and upheld the CIT(A)'s decision. Consequently, the Tribunal dismissed the Revenue's ground on this matter.In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the Revenue on the first issue regarding the deletion of interest amount on account of earlier years, while upholding the decisions of the CIT(A) on the other issues related to interest on loan and apportionment of green leaves.