2014 (7) TMI 797

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....43(3) of the I.T. Act and in the course of assessment considered an amount of Rs. 33,72,55,000/- as an advance made to M/s. Satyam Computer Services Limited on which assessee claimed 18% interest by filing a suit before the City Civil Court, Secunderabad. Accordingly, A.O. worked out interest on the advance amount of Rs. 33,72,55,000/- and brought to tax an amount of interest of Rs. 3,53,66,264/- in the assessment made. 2.1. The Ld. CIT(C) noticed that the total advances made by the assessee was at Rs. 34,72,00,000/- (which included an amount of Rs. 7,80,00,000/- which was advanced on 10.08.2007) as against Rs. 33,72,55,000/- taken by the A.O. and as there was an omission of calculation of interest at 18% on the balance of Rs. 1,00,00,000/....

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....lculation and charging of interest. He came to the conclusion that interest has been under-assessed. Accordingly, he set aside the assessment order with a direction to recompute the income of the assessee company after making necessary verification of the issue. 3. Questioning the above order of the CIT(C) under section 263, assessee raised five grounds all pertaining to the issue of jurisdiction and levy of interest. 4. Ld. Counsel submitted that the very levy of interest as was done by the A.O. was subject matter of appeal before the Ld. CIT(A) and subsequently by the ITAT. The ITAT vide its order in ITA.No.66/Hyd/2010 dated 28.05.2014 dismissed the Revenue appeal by holding as under:     "16. Applying these principles t....

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....til the liability to pay the advances and the rate of interest at which the temporary advances are to be repaid is determined by the Civil Court, it cannot be said that the same has accrued or arisen to the assessees. However, if the assessees had advanced interest bearing funds as interest free advances, the interest paid by the assessees towards such borrowed funds would have to be disallowed and treated as the income of the respective assessees. The Hon'ble Punjab and Haryana High Court in the case of Abhishek Industries (supra) has held that the nexus between the interest bearing funds and the interest free advances will have to be proved before making the disallowance of interest and bringing it to tax. We find that neither the Assessi....