AI Drafter 
TaxTMI 
TaxTMI 
2021 (3) TMI 1153
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....6-17 on 15-10-2016 electronically under section 139(1) of the Income-tax Act, 1961 admitting loss of Rs. 2,01,87,118/-. Subsequently, the assessee filed a revised return admitting a loss of Rs. 1,81,15,077/-. The aforesaid return was manually selected for scrutiny. ........ 3. After examination and verification of the details and particulars produced / furnished the assessment is completed as under: From the above breakup, it is crystal clear that the above interest expenditure is a mere provision and contingent in nature only and the same was not realised during the year under consideration. Therefore, the same is not allowable business expenditure. It is pertinent to mention here that the assessee had the same practice for AY 2014-15 & 2015-16. While, doing the scrutiny assessment for AY.2014-15 & 2015-16, the AR of the assessee was asked to show-cause as to why the finance cost should not be disallowed under section 43B of the Act. The AR of the assessee furnished a detailed note on the same. The AO has treated the AR's contentions reasonably in that assessment order and disallowed the entire finance cost. Without prejudice to the above propos....
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....een raised. The major disallowance made by the assessing officer is Rs. 6,90, 10,878 being interest on the ground that it is only a provision and also a contingent liability and not actually paid thus attracting disallowance U/s 43B. In this regard it is submitted that the interest is not a contingent liability as it is payable at the contracted rate on the amount borrowed. There is no contingency involved and it is an ascertained liability. Further since the appellant is a company it is mandatory to follow mercantile system of accounting and therefore interest attributable for the year has to be accounted in the books as expenditure whether actually paid or not. As regards Section 43B is concerned, a reading of the said section clearly shows that the said section is applicable only to loans borrowed from banks and financial institutions and not any and every lender. In the case of the appellant, the loans borrowed are from Government of A.P and some Government companies. Therefore, the provisions of Section 43B are not at all applicable and the disallowance is erroneous. Secondly the assessing officer has disallowed Rs. 4,93,266 U/s 43B being rates and t....
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....t in respect of - d. Any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation in accordance with the terms-and conditions of the agreement governing such loan or borrowing shall be allowed irrespective of the previous year in which liability to pay such sum. was incurred by the assessee according to the method of accounting regularly employed by him only in computing the income referred to in Section 28 of the previous year in which such sum is actually paid by him. A reading of the above shows that the provisions of Section 43B in so far as interest payment is concerned applied only to borrowings from financial institutions. SFCs and IDCs only and none else. The borrowing on which interest is void by the assessee are from government of AP and Government Corporations like APRDC and APCSC. We therefore submit once again that except interest paid to Binny Limited all other interest is allowable." 4.5.2 The above submissions of the assessee is examined and not acceptable for the following reasons: i. The income from the Pro....
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....39;Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable' under this Act in respect of- (d) any sum payable by the assessee as interest on any loan or borrowing from anu public financial institution for a State financial . corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, [or] e) any sum payable by the assessee as interest on any [loan or advance] from a scheduled bank for a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank in accordance with the terms and conditions of the agreement governing such loan [or advances], [or] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him". As can be seen from the above section, the disallowance will apply only to loans borrowed ....
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....o State Government. The Assessing Officer, in the assessment order, has himself observed that the borrowings on which interest is paid by the assessee are from Government of A.P. and Government Cor orations like APRDC and APCSC. However in the instant case the AP DC and APCSC are not come under the purview of State Financial Corporation and State Industrial Investment Corporation, hence the above institutions does not fit into the provisions of Section 43B(d), The ITAT, Delhi in the case of Ramala Sahkari Chini Mills Ltd Vs. ACIT (ITA No. 6452/Del/2014), while deciding a similar issue, observed as under: "We have carefully considered the rival contentions. Assessee that accumulated amount of interest accrued and due but not paid to various unsecured loan and therefore the provisions of section 43(d) was invoked by the Ld.AO. However out of Rs. 3,63,59,677/- only Rs. 15,24,100/- has been charged for the profit and loss account on account of interest accrued and due but not paid. In view of this CTT(A) restricted the disallowance to Rs. "15,24,100/- only. In ITA No. 6157/DEL/2012 for assessment year 2007-08 in para number of 7 of the order it is held that if the interest in ....
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....ees are already covered by his order in said preceding assessment year and also they fall in the exempt category of recipients only. We make it clear that the Revenue is fair enough in its grounds in not disputing the status of the twin recipients hereinabove. We thus quote the hon'ble apex court's larger bench's decision in CIT Vs. K.Y.Pilliah (1967) [63 ITR 411] (SC) that the tribunal need not record independent findings on its own if it expresses its complete agreement with the first appellate authority's conclusion(s) under challenge. We hold in this factual backdrop that the CIT(A) has rightly deleted the impugned 43B disallowance pertaining to these twin payees/corporations. The Revenue's sole substantive grievance fails accordingly. 4. This Revenue's appeal is dismissed. Order pronounced in the open court on 24th March, 2021. ============= Document 1 4. Disallowance of Finance Cost: During the assessment proceedings, it is noticed that the assessee debited an amount of Rs.6,90,10,878/- towards Finance Cost. The assessee furnished the break-up of Finance Cost as under: St. Details No. Financial Code No. Amount Rs. in Re....