TaxTMI 
TaxTMI 
2025 (6) TMI 39
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....0,00,000/- is not income in the hands of the Appellant particularly in view of the fact the Appellant is acting as a nodal agency. 3. The Ld. CIT-A and the AO ought to have appreciated that the subsidy received of Rs. 150,00,00,000/- is passed to the executing agencies by the Appellant and thereby it is not to be treated as an element of income in the hands of the Appellant. 4. The Ld. CIT-A erred in upholding the order of the AO who disallowed the interest paid of Rs. 547,50,70,481/- invoking the provisions of Explanation 3C to Sec 43B on the mistaken assumption that the outstanding interest has been converted into fresh loan. 5. The Ld. CIT-A and the AO ought to have appreciated that the fresh loan obtained of Rs. 2280,00,00,000/- has no link to the repayment of interest amount of Rs. 547,50,70,481/- and hence ought not to have disallowed the interest paid. 6. The Ld. CIT-A erred in upholding the addition of Rs. 584,403/- out of the total addition made by the AO of Rs. 24,75,450/- U/S 68, being the difference in principle amount in the books of the Appellant and that of the lender which resulted from differential treatment in the books of the A....
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....0,00,000/- 4. Income determined on account of disallowance of interest expenses u/s. 36(1)(iii) for noncompliance to the provisions of Section 43B(d) r.w. explanation 3C of the Act. Rs.5,47,50,70,481/- 5. Income determined on account of failure on the part of the Assessee Company to reconcile differences of between the closing balance as per Assessee Company's reconciliation statement and closing balances as per HUDCO's ledger account as deemed income u/s. 68 r.w.s 115BBE of the Act. Rs.24,75,450/- 6. Income determined on account of failure on the part of the Assessee Company to reconcile differences of Rs. 7,30,37,305/-between the closing balance as per Note-4 annexed to and forming part of balance sheet and break-up of 'interest paid for F.Y.2020-21' as deemed income u/s. 68 r.w.s 115BBE of the Act. Rs.7,30,37,305/- 7. Income determined on account of failure on the part of the Assessee Company to reconcile differences of Rs. 214,59,47,070/-between the closing balance as per Assessee Company's reconciliation statement and closing balances as per HUDCO's ledger account as deemed income u/s. 69 r.w.s 115BBE of the Act. Rs.2....
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....ith Explanation-3C of the Act and also sustained the addition to the tune of Rs. 214,59,47,070/- towards reconciliation difference between closing balance as per books of accounts of the assessee and closing balance as per the HUDCO ledger account as deemed income u/sec.69 r.w.s.115BBE of the Income Tax Act, 1961. 5. Aggrieved by the learned CIT(A) order, the assessee is now in appeal before the Tribunal. 6. The first issue that came-up for our consideration from ground nos.2 and 3 of the assessee's appeal is addition of Rs. 150 crores towards grant received from Government of Telangana. The facts with regard to impugned dispute are that, during the previous year relevant to assessment year 2021-2022 the appellant received an amount of Rs. 150 crores from the Government of Telangana towards construction of the two bedroom houses to the urban poor. The appellant has passed on the amount received from Government of Telangana to the Commissioner, Greater Hyderabad Municipal Corporation [in short "GHMC"] and District Collectors for executing the housing project as per the scheme promoted by the State Government. The assessee claimed that, since it is a Nodal Agency for implementi....
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....espective Districts. This fact has been brought to the notice of the Assessing Officer and also explained how the amount has been treated in the books of account of the assessee. Although, these evidences has been furnished to the Assessing Officer, the Assessing Officer has disregarded the evidences filed by the assessee and made the impugned additions towards grant received from the Government of Telangana as 'Income' of the assessee u/sec.2(24)(xviii) of the Act. In this regard, he filed relevant Government Orders [in short "G.Os] issued by the Government of Telangana and also relevant bank statements to prove that, the amount received from Government of Telangana has been back-to-back paid to respective implementing agencies on the very same day. 9. Learned CIT-DR Shri B Bala Krishna, referring to the provisions of sec.2(24)(xviii) of the Act, submitted that, any assistance in the form of grant or subsidy received from Government or any Agency, should be treated as 'income' of the assessee. Further, as per sec.145(3) and Income Computation and Disclosure Standards [in short "ICDS"] issued by the CBDT, the assessee needs to account grant received from the Government as it'....
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.... per the said orders, the entire project has been implemented by the District Collectors or Commissioner, GHMC and the amount has been routed through the appellant being a Nodal Agency for implementing the project in the State of Telangana. We further note that, the assessee has already filed relevant bank statements and also the extract of receipts issued by the Finance Department, where the amount received from the Finance Department has been passed on to the Commissioner, GHMC on the very same day and these evidences are available in the paper book at pages 193 to 199 of the paper book. From the details filed by the assessee, we find that the entire amount of Rs. 150 crores grant received from the Government, has been transferred to the Commissioner, GHMC on three different dates i.e., on 18.01.2021, 28.01.2021 and 06.03.2021. Therefore, we are of the considered view that, once the grant received from the Government has been transferred back-to-back to the implementing agencies, in our considered view, the argument of the assessee that the subsidy received from government is not it's income is acceptable. Further, assuming for a moment, the version of the Assessing Officer i....
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....nt and therefore, called-upon the assessee to explain as to why the provisions of sec.43B(d) r.w. Explanation-3C shall not be invoked and entire interest expenditure be disallowed. In response, the assessee submitted that the loans availed from financial institutions including HUDCO are availed on the basis of guarantee given by the Government of Telangana and the repayment of entire loan including interest is directly made from the budgetary support of the State Government. The assessee has borrowed various loans from the Government for the housing projects and the loans borrowed from the financial institutions including HUDCO has been treated as it's 'liability'. The entire amount of loan has been repaid by the Government directly to the HUDCO and other financial institutions and assessee only passed corresponding entries in it's books of accounts to give effect to the repayment of loan. The assessee further submitted that the Assessing Officer has erroneously invoked the provisions of sec.43B(d) Explanation-3C, even though, the entire repayment of loan including interest for the financial year 2020-2021 has been directly paid by the State Government through Finance Departmen....
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....anation-3C, a deduction of any sum being interest payable under clause-(d) of Section-43B, shall be allowed, if such interest has been actually paid and any interest referred to in that clause, which has been converted into a loan or borrowing, shall not be deemed to have been actually paid. In other words, the Assessing Officer invoked provisions of sec.43B(d) on the ground that assessee has converted it's interest liability into a 'fresh loan' and, therefore, as per Explanation-3C, the payment of interest cannot be deemed to be have been actually paid. 16. We find that as per the details filed by the assessee during the financial year 2020-2021, the assessee has accounted interest payment of Rs. 547.50 crores to HUDCO and debited to Profit and Loss A/c under the Head "Finance Charges". But, in fact, the said payment has been directly paid by State Government through it's Finance Department to HUDCO as per the terms of agreement between the parties with the lender. The assessee had only passed journal entries in it's books of accounts to give effect to the repayment of loan for the purpose of accounting treatment only. There is no actual payment of interest to HUDCO by the asse....
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.... 'liability' and repayment of loan is directly debited to said liability account, but, claimed deduction towards interest expenditure contrary to it's own accounting treatment given in it's books of accounts. Further, it is not a case of the assessee that, whatever grant received from the Government towards repayment of loan and interest has been accounted as income and corresponding interest payment has been treated as its expenditure. Since the assessee has not considered the amount received from the Government as it's income to meet the expenditure of interest payment, in our considered view, the claim of deduction towards interest expenditure cannot be allowed. Although, the Assessing Officer has not examined the issue on these lines, but, disallowed the expenditure by invoking provisions of sec.43B(d) and Explanation-3C of the Act, in our considered view, the deduction claimed by the assessee towards interest expenditure of Rs. 547.50 crores cannot be allowed as deduction. Therefore, we are the considered view that, the matter needs to be examined by the Assessing Officer in light of our discussion given hereinabove and to decide the issue in accordance with law. Thus, we set ....
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....itted that the assessee has explained the reasons for difference of Rs. 5,84,403/- with relevant evidences and submitted that, in respect of loan account no.xxxx20842, the HUDCO has given incentive to the appellant for early payment of one of the instalment for an amount of Rs. 5,84,403/-. However, assessee has not passed the entry in it's books of accounts. because there was no information with the assessee about the incentive given by the HUDCO. But, at latter stage, on the basis of confirmation filed by the HUDCO, the assessee has explained the Assessing Officer the reasons for difference. The Assessing Officer and the learned CIT(A) without considering relevant explanation furnished by the assessee, has simply made addition and, therefore, he submitted that the addition made by the Assessing Officer should be deleted. 22. The learned CIT-DR Shri B Bala Krishna, on the other hand, supporting the order of the learned CIT(A) submitted that, even before the CIT(A), the assessee could not explain the difference with relevant evidences. Although, the assessee has claimed that, it has received incentive for early payment of one of instalment, but, no supporting evidence has been fu....
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....rious loans from HUDCO for the purpose of executing housing project and during the period of Covid, the HUDCO has granted moratorium for two quarters by virtue of directions of the Reserve Bank of India [in short "RBI"] for repayment of loan and the same has been converted into Fund Interest Term Loan [in short "FITL"]. However, the assessee has not passed any entries in it's books of account for the fresh loan granted by the HUDCO in respect of two instalments of moratorium granted to earlier loans. The assessee further submitted that, in respect of differences in loan borrowed from LIC/GIC, the assessee has not given effect to the bifurcation of loan amount borrowed by the erstwhile combined State of Telangana and State of Andhra Pradesh. Further, the assessee has explained the loan account with relevant evidences to prove that, there is no difference as computed by the Assessing Officer. The Assessing Officer, however, was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, there is a negative difference of Rs. 214,59,47,070/- in respect of various loans borrowed from HUDCO and LIC/ GIC and the assessee could not explain the diffe....
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....gh, there is a moratorium period, but, the assessee has to follow the accounting method as per the terms of sanction from the HUDCO. Since the assessee is not able to reconcile the differences with relevant evidences, the learned CIT(A) has rightly sustained the addition made by the Assessing Officer and thus, the other of the learned CIT(A) should be upheld. 29. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the appellant being a State Government undertaking is the Nodal Agency for implementing various housing projects promoted by the State Government. The assessee has borrowed various loans from financial institutions including HUDCO and all loans borrowed by the assessee from HUDCO are fully guaranteed by the State Government. Further, the entire loan amount including interest has been directly paid by the State Government through it's Finance Department to the HUDCO. In other words, there is no financial transactions between the assessee and the HUDCO in respect of repayment of loan including interest on said loans. In light of the above factual background, if we examine ....
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....he issue needs to go back to the file of Assessing Officer for fresh verification of facts in light of various evidences filed by the assessee including relevant letters issued by the HUDCO granting moratorium period for repayment of loan and also fresh loan ledger account furnished by the HUDCO under the scheme FITL account. Similarly the assessee has explained difference in loan account of GIC/LIC and stated that in view of unaudited accounts relevant entries has not been passed in the books of account of the assessee to give effect to various journal entries on account of bifurcation of old loans in the books of account of assessee before the bifurcation of combined Andhra Pradesh into State of Telangana and State of Andhra Pradesh. These facts needs to be verified by the Assessing Officer. Thus, we set aside the issue to the file of Assessing Officer and direct to the Assessing Officer to verify the issue in light of various evidences filed by the assessee and decide the issue in accordance with law, after considering relevant recalculation filed by the assessee. 32. The next ground no.11 of the assessee's appeal is addition of Rs. 10,89,330/- towards unrecorded rent from Na....