2016 (1) TMI 713

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....Ld. CIT(Appeals) has erred in deleting disallowance of interest expenses of Rs. 12,91,84,505/- on loans from Ministry of Chemical and Fertilizer ignoring the finding of the assessing officer that the interest expenses are not allowable u/s 36(1)(iii) of the I.T. Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting disallowance of depreciation of Rs. 73,12,202/- on the basis of assessee's evidence of 3 sales invoices in respect of which opportunity was not granted to the assessing officer under rule 46A of the Income-tax Rules." 2005-06: "1. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting disallowance of interest ....

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....nder consideration, the Govt. of India had sanctioned plant loan of Rs. 2.5 crores bearing interest of 14.50% for 10 years in 10 equal annual installments commencing from first anniversary from the date of drawing. The assessee claimed an amount of Rs. 12,91,84,505/- towards payment of interest to the Govt. of India in respect of working capital loan sanctioned to it by that department of which the assessee is a public sector Undertaking. The Assessing Officer disallowed the claim of assessee observing that the assessee has not actually paid interest to the Govt. of India and therefore, applying the provisions of section 43B added back the same to the total income of the assessee. The Assessing Officer also disallowed 50% of the depreciatio....

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....assessee by the Ministry. There is no finding in the assessment order also to suggest that the assessee did not use the borrowed funds for the purpose of business. In the event that the assessee maintains mercantile system of accounting, has provided interest on the loans from the Ministry in its accounts, and since, there is no evidence to suggest that interest on the loans have been waived by the Ministry, the disallowance of interest of Rs. 12,91,84,505/- invoking the provision of section 36(1)(iii) is not in order, no matter that interest has not been paid on the borrowings from the Government. In view of these findings, we do not find any infirmity in the conclusion arrived at by the ld.CIT(A) while deleting the disallowance of impugne....