TaxTMI 
TaxTMI 
2026 (3) TMI 876
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....disallowance u/s 14A r.w.r. 8D(2) and to exclude such investment which did not earn exempt income from the total investment for the purpose of computation of disallowance u/s 14A, thereby ignoring clarificatory Explanation of disallowance u/s. 14A(1) inserted vide the Finance Act 2022 that the provisions of this section shall apply and shall be deemed to have always applied even in a case when exempt income has not accrued or arises or has not been received during the previous year but expenditure has been incurred during the said previous year in relation to earning of such exempt income." 2. "The Ld. CIT(A) erred in deleting disallowance made u/s 43B of the Act without appreciating the fact that assessee company have failed to make interest payment to Punjab and Maharashtra Co-operative Bank on or before the due date of filing of return of income which was disallowable u/s 43B of the Act." 3. "The Ld. CIT(A) erred in deleting disallowance made u/s 43B of the Act by holding that interest payable to a co-operative bank which was brought within the ambit of Section 43B of the Act with effect from A. Y. 2018-19 without appreciating the fact that Punjab and Maharasht....
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....860/- in overdraft from Punjab and Maharashtra Cooperative Bank (PMC) consisting of the interest expenses of Rs. 14,77,80,860/- included dividend of Rs. 3,00,000/-. The assessee added this overdraft interest with the work in progress. But Ld. AO during assessment made the addition u/sec. 43B(e) in observations that the said interest on overdraft has contravening provision of 43B(e) of the Act. And also the addition u/sec. 14A(1) related to dividend income of Rs. 3,00,000/- was calculated and added back with the total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee by considering the order of the Coordinate Bench of ITAT. Related to addition u/sec 14A the Ld. CIT(A) relied on the order of the Coordinate Bench of ITAT-Mumbai in assessee company's own case, ITA No. 2391/Mum/2018, A.Y.2014-15 pronounced on 31/07/2019 and deleted the disallowance of expenses u/sec 14A of the Act. But related addition u/sec 43B the Ld. CIT(A) relied on the order of the Coordinate Bench of the ITAT-Mumbai in assessee's own associates case in Awas Developers & Constructions Private Limited for the A.Y. 2016-17, &Gamm....
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....nue is dismissed. 7. Related to Ground No.2 & 3 the Ld. DR vehemently argued and stands in favour of the order of the Ld. AO. He filed a written submission which is reproduced as below: "2. Disallowance of interest u/s 43B amounting to Rs. 14,77,80,860/-. "2.1. AO's ground: In the course of assessment the AO has found from the copy of the ledger account that the assessee had opening an overdraft to the tune of Rs. 75,56,51,607/- and closing overdraft to the tune of Rs. 90,31,12,467/-resulting into net increase in overdraft amounting to Rs. 14,74,80,860/- The overdraft was taken from Punjab & Maharashtra Co-op. Bank (PMC). The said increase in overdraft was nothing but interest expense of Rs. 14,77,80,860/-minus dividend received of Rs. 3,00,000/-. The AO has specifically asked the assessee whether the interest on overdraft was paid on or before due date of filing of return against which no response have been submitted. The assessee, however, stated that provision of Sec. 43B was not applicable on interest payment to PMC Bank since, it had not claimed any deduction in respect of such amount. The AO was of the opinion that since interest on overdraft....
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....amendment made w.e.f 01.04.2018 is not applicable in this instant case. The CIT(A) had not examined necessary facts before proceeding towards deletion of the addition claiming that the assessee being a cooperative bank, sec. 43B(e), was not applicable. A copy of list of scheduled co-operative banks is 2.5. Regarding the fact, that the interest was capitalized in the WIP, it is to be noted that the capitalization of interest in revenue W.LP only defers claiming of such expenditure in the P & L a/c, since, the assessee being in real estatebusiness will claim deduction on account of expenditure which are part of the WLP when revenue stream commences. The capitalization of interest, is deduction claimed in an indirect manner, and comes within purview of sec. 438 of the Income tax act 2.6. It is well settled that a finding or conclusion not supported by evidence brought on record or are against the law or suffer from the vice of procedural irregularity are perverse findings. The expression "perverse findings" would mean a finding which is not only against the weight of evidence but is altogether against the evidence itself. A deliberate departure from what is normal an....
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.... the backdrop of facts stated above. 2.7. It is therefore respectfully submitted that the order of the CIT(A) is erroneous in facts and law and liable to be considered "perverse" in nature and accordingly be set aside." 8. On contrary to DR's argument the observations of the Ld. CIT(A) related to this issue is noted in paragraph no.9 to 9.3 which is reproduced as below:- "9. Ground No.4. The Ld. AO during the course of assessment proceedings had asked the assessee to furnish details of interest payment and whether the interest was actually paid on or before the due date of filing return. Further, the AO had asked in case of failure of outstanding interest payment before due date of filing of return, why the same should not be added total income/reduced from WIP as per provisions of section 43B of the IT Act. In response, the assessee in its reply to the AO has submitted as under: "6. Sir, the Assessee Company had provided copy of ledger account of interest expenses incurred during the year under consideration along with justification why amount of interest expenses should not be disallowed u/s 43B of the IT Act, 1961 vide office letter dated 03/12/2019....
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....pplicable to the interest payable to a Cooperative bank by the Finance Act, 2017 w.e.t. 1.4.2018. The word "co-operative bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank was inserted in Clause (d) of sub-section 43B w.e.f. 1.4.2018, meaning thereby, interest payable to a cooperative bank which is not paid on or before the due date prescribed for filing of return of income under section 139(1) of the Act shall be liable to be disallowed under section 438 of the Act only w.e.f. A.Y 2018-19.1 notice that the year under consideration is A.Y. 2016-17 For this year, interest payable to a co-operative bank has not been included in the provisions of section 43B of the Act. Accordingly, disallowance made by the Assessing Officer and confirmed by learned CIT(A) is not in accordance with law Accordingly. I set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance of interest payable to M/s Punjab and Maharashtra Co-operative Bank made under section 438 of the Act." 9.3. Facts of the case have been examined. The Hon'ble ITAT in the above referred decision....