TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 140
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....ent would otherwise be allowable. The provision mandates that all other tests of allowability except that of the time of payment am covered under the said section. 2.3 The Ld. CIT(A) failed to appreciate that for allowing deduction under section 438 of the Act, the requisite condition is that it should have been recorded in the books of account of the previous year to which pertains, prior to making a claim of deduction under section 43B of the Act. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) may be set aside and that of the A.O. restored." 3. Brief facts of the case are that the assessee is engaged in the business of manufacturing of garments filed its return of income for the assessment year 2015-16 on 28.09.2015 admitting Nil total income. During financial year relevant to assessment year 2015-16, the assessee has claimed deduction for interest paid on loans borrowed from bank on payment basis in terms of provisions of section 43B of the Income Tax Act, 1961. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has not made provision for interest payable t....
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....ellant's contentions are considered. The first reason cited by the Assessing Officer for disallowing the said amount is that as per the provisions of section 43B, the claim should be otherwise allowable as per the Act. According to the Assessing Officer, as the appellant has not provided in the books of accounts for any interest from assessment year 2002-2003 till the assessment year 2015-16, it cannot be said that the amount was otherwise allowable as per the Act Thus, as per the Assessing Officer, in order to ava1 deduction u/s.43B on payment basis, the amount claimed should have been provided for in the books of accounts and the claim in this regard should have been made in the respective years even though on the basis of sec 43B they were not, allowable in those years as they remain unpaid. Thus the Assessing Officer has interpreted the term "otherwise allowable under the Act" as requiring the fulfillment of further conditions of making an entry in the books of accounts and also making a claim on due basis in the relevant year even though the amount is allowable on payment basis only during the current assessment year. 8. The Calcutta High Court had occasion to consider a si....
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....that where mercantile system is followed deduction of tax under section 43B is impermissible unless provision was made in the year in which the liability for tax accrued or arose. We put it on record only for the purpose of completeness, that the matter was once heard before the reference Bench and it is the contention of the assessee that when judgment was delivered in open court the indications were that both the questions had been, answered in the negative and, therefore, in favour of the assessee, but when the written judgment actually became available as it had appeared that one of the questions had been answered against the assessee. Bu as that earlier judgment has been recalled we pass the order afresh, this time holding in favour of the assesee on both the issues. 9. In the case of Chemicals & plastics India Ltd Vs. CIT (2003) 260 ITR 193 (Mad), the jurisdiction High Court had occasion to consider the claim u/s.43B in respect of custom duty paid on raw material which was carried forward as finished goods in the P&L Account. The Honourable Madras High Court allowed the deduction on payment basis in respect of the entire amount paid during the year irrespective of the f....
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.... fee, by whatever names called, under any law for the time being in force 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 under section 28 of that previous year in which that sum is actually paid by the assessee. The first proviso permits such payment being made even after the close of the previous year, but prior to filing the return of income under section 139(1) of the Act. The assessee therefore, is entitled to the deduction of the amount of duty paid in the year in which the payment was made. The fact that part of the customs duty was paid in respect of raw materials which remained with the assessee at the end of the rear would not deprive the asessee of the benefit of claiming the deduction in the year in which duty had been actually paid, So also the right of the assessee to claim deduction for the amount of excise duty paid in the year in which it was paid is unaffected by the fact that part of the duty paid was in relation to finished goods which remained with the assessee at the end of the year.....
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....in deleting the disallowance of Rs. 1,41 57,121/- u/s 43B made by the AO. In the result, the ground taken by Revenue is dismissed. Thus it is held that the amounts covered u/s.43B are to be allowed n payment basis and the fact that they are not specifically charged to the P&L Account would not disentitle the assessee from claiming the said amount, Respectfully following the same, this objection of the Assessing Officer is rejected. 11. As regards the second reason cited by the Assessing Officer that the appellant had not utilised the loan for the purpose of its business, it is found that this conclusion of the Assessing Officer is based on certain remarks made by the Bank at the time of conducting stock audit. On the other hand, reference to the Balance sheet of the appellant during the intervening period shows that the amount of loan availed by the appellant remained invested in the business and therefore the Assessing Officer's contention that it has been utilised for non business purposes appears to be incorrect. In view of the same this argument of the Assessing Officer is rejected. 12. As the loan availed by the appellant from Canara Bank has been utilised for the pur....
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....tention of the Revenue insofar as nexus between loans borrowed from bank and business activities of the assessee, the learned CIT(A) has recorded categorical finding that loans have been borrowed for purpose of business of the assessee and hence, there is no merit in the ground taken by the Revenue to challenge nexus between loans and its utilization in business of the assessee. As regards contention of the Revenue with regard to applicability of section 43B of the Income Tax Act, 1961, we find that as per provisions of section 43B(e) of the Act, interest on loans borrowed from banks and financial institutions is deductible on payment basis in the year in which such interest was actually paid to banks. The contention of the Revenue that before making claim for deduction, the assessee ought to have been recorded such interest in books of account of the assessee for the previous year to which said interest pertains, we find that as per mandate of provisions of section 43B of the Act, deduction is allowable in respect of sum paid including interest as per sub-section (e) of section 43B of the Act, is allowed only on actual payment basis in the year in which such interest has been actu....