TaxTMI 
TaxTMI 
TaxTMI 
2012 (5) TMI 201
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntribution to PF deposited after due date but before the date prescribed for filing return of income for the A.Y. 2003-04 under section 36(1)(iv) read with Section 43B, in view of omission of Second Proviso to section 43B made by Finance Act, 2003. 1.3 That on the facts and in the circumstances of the case, Assessing Officer erred in law by not setting of carried forward unabsorbed depreciation of Rs. 30,05,324 under section 32(2) of the Income-tax Act, 1961 even if he has treated interest on FDRs as income assessable, as Income from other sources under section 56 of the Income-tax Act, 1961." 2. That on the facts and in the circumstances of the case. ld. Assessing officer erred in law by not allowing expenditure of Rs. 2,84,64,114,02 on account of interest paid on unsecured loans raised from Financial Institutions and Bank, u/s 36(1)(iii) of the Income-tax Act, 1961. 3. That on the facts and in the circumstances of the case, ld. Assessing officer erred in law by not allowing expenditure of Rs. 4,17,736 on account of Employers contribution to PF deposited after due date but before the date prescribed for filing return of income for the A. Y. 2003-04, under section 36(1)(iv) read....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s 234B is unjustified/unlawful and same be quashed :- "I find that interest u/s 2348 is chargeable with reference to determination of income since appellant had not paid any advance tax, 1 appellant is liable for charging of interest u/s 2348. In my considered view, charging of interest u/s 234B is with reference to the determination of income u/s 143(3) and is almost automatic and thus, in my view, there is no legal flaw in the action of the Assessing officer in charging of Interest u/s 234B of the Income-tax Act, 1961." 3. Rival contentions have been heard and records perused. The facts of the case are that the assessee is a fully owned State Government undertaking engaged in construction of residential houses for police personnel. The assessee has availed the loan from financial institutions for construction of housing project for police personnel but the same was not claimed as deduction out of business income. However, in the books of accounts, the assessee has capitalised the interest expenditure. During the course of appellate proceedings, the assessee has raised additional ground that interest paid to HUDOC and State Bank of Indore should be allowed as expenditure u/s 36....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he same have been capitalized. For the first time, before the CIT(A), the assessee has claimed deduction of such interest expenditure u/s 36(1)(iii) of the Income-tax Act, 1961. As per provisions of Section 36(1)(iii), any interest paid on the loans taken for the purpose of business is to be allowed as business expenditure. There is no dispute to the well settled legal proposition that claim of deduction under the Income-tax Act, 1961, is to be allowed as per provisions of Income-tax Act, 1961, and not as per the entries made in the books of account. An expenditure which has been claimed in the profit and loss account by recording the same in regular books of account, which is not allowable under Income-tax Act, 1961, cannot be allowed merely because an entry has been passed in the books of account. Similarly, an expenditure, which is allowable under the Income-tax Act, 1961, cannot be declined merely because such expenditure has not been correctly debited in the books of account. The case laws relied upon by the ld. Authorized Representative in the case of Sutlej Cotton Mills Ltd. (supra) and Kedarnath Jute Mfg. Co., (supra), supports this proposition. In view of these decisions, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts are liable to be taxed as "income from other sources", if such deposits are out of surplus fund of the assessee. However, where such FDRs are made as a business compulsion, then such interest income is liable to be set off against interest expenditure incurred by the assessee for the purpose of business. 11. In the instant case, we find that the State Government is the customer of M.P. Housing Board and releases advance for construction of houses for police personnel of State Government Police Department. Assessee has also taken loan from bank and financial institution for the purpose of its business of construction of housing. Out of these advances received from State Government and loan from bank for construction purpose, money was alleged to be deposited by assessee in the form of FDRs on which interest was earned. As per the learned counsel for the assessee, since the assessee used to pay interest on the loans taken from financial institutions, the same is allowable as business expenditure, therefore, the interest income earned on FDRs out of the loans and advances received in the course of assessee's business of construction of houses, the same should be allowed to be redu....