VEER JAGDEORAO KAPUS UTPADAK SAHAKARI SOOT GIRNI LTD., MALKAPUR V. A.C.I.T. , AKOLA CIRCLEA, Akola

ITA 123/NAG/2017

AI Insights

The case involves Veer Jagdeorao Kapus Utpadak Sahakari Soot Girni Ltd., the appellant, contesting an order from the Commissioner of Income Tax (Appeals)-1, Nagpur, which confirmed the addition of Rs.1,89,80,888/- as disallowed interest under section 43B by the AO. The loans in question were initially taken from ICICI, IDBI, and IFCI banks, which were later repaid by the Government of Maharashtra in 2003-04 under a government scheme. The dispute centered on whether the interest accrued on these loans, which were not paid but recorded in the books, was deductible under section 43B. The Tribunal's decision hinged on the interpretation of section 43B in relation to loans from the State Government, concluding that such interest is not covered under section 43B, thus allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133425 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2017
• Other Referred Cases: Jodhpur Vidyut Vitaran Nigam
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 43B; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण Ɋायपीठ नागपुर मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH : : NAGPUR V I R T U A L H E A R I N G BEFORE S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No.123/NAG/2017 िनधाᭅरणवषᭅ / Assessment Year : 2007-08 Veer Jagdeorao Kapus Utpadak Sahakari Soot Girni Ltd., Nandura Road, Malkapur – 443101. Dist: Buldhana. PAN: AAAV 0208 Q Vs The ACIT, Akola Circle, Akola. Appellant/ Assessee Respondent / Revenue Assessee by Shri S.C.Thakar – AR Revenue by Shri G.J.Ninawe – DR Date of hearing 17/11/2022 Date of pronouncement 14/02/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeals)-1, Nagpur dated 21.12.2016 emanating from the order of ACIT(AO), Akola under section 143(3) of the Act, 1961, dated 30.10.2009 for A.Y. 2007-08. The Assessee has raised the following grounds of appeal : “1] Learned C.I.T.(A) erred in disallowing the assessee’s appeal and confirming the addition amounting to Rs.1,89,80,888/- U/s.43B made by the A.O. ITA No.123/NAG/2017 for A.Y.2007-08 Veer Jagdeorao Kapus UtpadakSahakari Soot Girni Ltd., [A] 2 2] Learned C.I.T.(A) erred in confirming the disallowance of interest made by the A.O. 3] Learned C.I.IT(A) erred in not properly consider/understood the appellant’s submission and various documents filed before her. 4] Appellant craves to urge additional grounds at the time of hearing, if necessary.” 2. Brief facts: The Assessing Officer (AO) disallowed interest amount of Rs.1,89,80,888/- under section 43B of the Act. In this case, assessee had taken following loans : a. ICICI Bank Rs.1,55,45,000 b. IDBI Bank Rs.3,00,30,000 c. IFCI Rs.1,23,60,000 Total : Rs.5,79,35,000 3. These loans were taken in earlier years i.e. 1993-94 as mentioned in the assessment order. Subsequently, Co-operative Marketing and Textile Ministry, Government of Maharashtra repaid these loans by sanctioning loan to the assessee under a scheme, in the year 2003-04, as Government of Maharashtra was Guarantor for the loans taken from the Banks by the assessee. Assessee has provided for interest in his books for the loan given by the Government of Maharashtra. The AO stated that the loans pertain to Banks and assessee has not paid the interest amount, whereas the interest shown ITA No.123/NAG/2017 for A.Y.2007-08 Veer Jagdeorao Kapus UtpadakSahakari Soot Girni Ltd., [A] 3 by the assessee in the books of Rs.1,89,80,888/- is on the basis of accrual, therefore, it is not allowable as per section 43B of the Act. Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) held as under: “As per AO, unpaid interest of Rs. 1,89,80,888/- pertains to the period from F.Y 2002-03 to 2006-07 in respect of loans received from ICICI, IDBI & IFCI & remaining outstanding. In my considered view, AO is found justified in making the said disallowance. There has been me/e restructuring of the earlier loans which have been taken from scheduled commercial Banks & Financial Institutions. The mere fact that Government of Maharashtra, in exercise of its sovereign and state functions, has paid outstanding principal amounts to the banks & then disbursed assistance amounts to specified spinning mills does not take away the nature & character of these amounts as loans. Further, letter dated 22.10.2002 issued by concerned Government Department itself mentions that disbursed amounts been sanctioned on terns & conditions mentioned therein with interest chargeable at prevailing rates. Thus, the appellant’s contention that it was under belief that these amounts been sanctioned interest free is not found correct. No interest been found paid which .as now been become a statutory enforceable liability nor even any provision made for any of the intervening years from F.Y. 2002-03 till 2006-07. However for the assessment year under consideration, provision of Rs.1,89,80,888/- made by the appellant in its books of accounts & as mentioned in notes to Accounts (SI. No. 9) in the Auditor’s Report. Appellant’s reliance on decision of Hon’ble AAR passed in case of Jodhpur Vidyut Vitaran Nigam (Supra) is not found acceptable being distinguishable on facts & given in the context of allowability of prior period expense as business expenditure u/s 36(1) of the IT ITA No.123/NAG/2017 for A.Y.2007-08 Veer Jagdeorao Kapus UtpadakSahakari Soot Girni Ltd., [A] 4 Act. )” 4. Aggrieved by the order of ld.CIT(A), the assessee filed appeal before this Tribunal. 5. We have heard both the parties and perused the records. The only issue for our consideration is whether assessee is eligible for claiming deduction of Rs.1,89,80,888/-. There is no dispute in the fact that Government of Maharashtra has repaid the loan taken by the assessee from following banks : a. ICICI Bank Rs.1,55,45,000 b. IDBI Bank Rs.3,00,30,000 c. IFCI Rs.1,23,60,000 Total : Rs.5,79,35,000 These repayments were in the year 2002-03 and 2003-04 as mentioned by the Ld.CIT(A) in the order. 6. Section 43B as applicable for A.Y.2007-08 is reproduced as under:- 43B. 55 Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of— 56 [( a) any sum payable by the assessee by way of tax 57 , duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b ) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 58 [or] ITA No.123/NAG/2017 for A.Y.2007-08 Veer Jagdeorao Kapus UtpadakSahakari Soot Girni Ltd., [A] 5 59 [( c) any sum referred to in clause (ii ) of sub-section (1) of section 36,] 60 [or] 60 [( d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 61 [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 62 [, or] 62 [( e) any sum payable by the assessee as interest on any 63 [loan or advances] from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan 64 [or advances],] 65 [or]..................... 7. Thus, after 2003-04, there was no loan outstanding in the books of the assessee in the name of ICICI, IDBI and IFCI Banks. The loan outstanding in the books of assessee was the loan given by Government of Maharashtra. As per Audit Report, notes to accounts at Sr.No.9 the Auditor has mentioned as under: “During the year provision has been made for interest on term loan obtained from Government of Maharashtra at Rs.1,89,80,888/-.” 8. The AO has reproduced the above mentioned Auditor’s Remarks in the assessment order. The AO has not disputed this fact that since 2003-04 the loan outstanding in the account of the assessee was loan given by Government of Maharashtra. Section 43B does not apply to interest payable on loan taken from State Government. In this case, assessee has obtained loan from State Government. Therefore, Section 43B is not applicable on interest payable of Rs.1,89,80,888/- on the loan obtained from State Government. ITA No.123/NAG/2017 for A.Y.2007-08 Veer Jagdeorao Kapus UtpadakSahakari Soot Girni Ltd., [A] 6 Therefore, the disallowance made by AO is bad in law and AO is directed to delete it. Accordingly, grounds of appeal of the assessee are allowed. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 14 th February, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th Feb, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, नागपु रबᱶच, नागपुर/ DR, ITAT, Bench, Nagpur. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.