Dy. Commissioner of Income Tax , Circle-2(2), Hyderabad V. The Nizam Sugars Limited, Hyderabad

ITA 1239/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8650 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Keywords: Revised return; TDS
• Section: 28; 43B; 43D; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 1239/HYD/2019 ASSESSMENT YEAR: 2016-17 DCIT, CIRCLE-2(2), HYDERABAD VS M/S.THE NIZAM SUGARS LIMITED, HYDERABAD [PAN: AAACT7969A] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT.NIVEDITA BISWAS, DR FOR ASSESSEE : SHRI S.PHANINDRA, AR DATE OF HEARING : 22-02-2021 DATE OF PRONOUNCEMENT : 24-03-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2016-17 ARISES FROM THE CIT(A)-2, HYDERABADS ORDER DATED 24-05-2019 PASSED IN APPEAL NO.10259 / 2018-19 / CIT(A)-2 IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE PLEADS THA T THE CIT(A) HAS ERRED IN LAW AND ON FACT IN RESTRICTING THE ASSESSING OFFICERS ACTION MAKING SECTION 43B INTEREST DISALLOWA NCE OF RS.6,83,24,520/- AS UNDER: ITA NO. 1239/HYD/2019 :- 2 -: 4. CONTENTIONS OF THE AO: THE FINDINGS OF THE ASSE SSING OFFICER ARE EXTRACTED BELOW (RELEVANT PORTION OF THE ASSESSMENT ORDER RE- PRODUCED):- THE ASSESSEE IS A PRIVATE LIMITED COMPANY; WHICH F URNISHED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2016-17 ON 15-10-2016 ELECTRONICALLY UNDER SECTION 139(1) OF THE INCOME-T AX 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 DETAIL S AND PARTICULARS PRODUCED / FURNISHED THE ASSESSMENT IS COMPLETED AS UNDER: FROM THE ABOVE BREAKUP, IT IS CRYSTAL CLEAR THAT TH E ABOVE INTEREST EXPENDITURE IS A MERE PROVISION AND CONTINGENT IN N ATURE ONLY AND THE SAME WAS NOT REALISED DURING THE YEAR UNDER CONSIDE RATION. THEREFORE, THE SAME IS NOT ALLOWABLE BUSINESS EXPEN DITURE. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE H AD 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 SHOU LD 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 ARS ITA NO. 1239/HYD/2019 :- 3 -: CONTENTIONS REASONABLY IN THAT ASSESSMENT ORDER AND DISALLOWED THE ENTIRE FINANCE COST. WITHOUT PREJUDICE TO THE ABOVE PROPOSITION, THE ASS ESSEE ITSELF STATED IN THE BREAKUP STATEMENT THAT THE ABOVE AMOUNTS ARE 'INTEREST PROVISION' MADE. UNDER THE PROVISIONS OF THE AD, AN Y PROVISION FOR EXPENDITURE COULD NOT BE ALLOWED UNLESS CRYSTALLISE D. HENCE, THE PROVISION FOR THE INTEREST MADE AND DEBITED TO P&L ACCOUNT IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME/LOSS OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, INTEREST PROVISION OF RS.6,90, 10,878/- IS DISALLOWED AND ADDED TO THE TOTAL INCOM E/LOSS OF THE ASSESSEE. ADDITION: RS.6,90,10,878/- 5. DISALLOWANCE OF RATES & TAXES AND LEAVE ENCASHME NT: IT IS NOTICED THAT THE AMOUNT OF RS.4,87,590/- AND RS.5,676/- WERE INCURRED TOWARDS' 'TAXES, DUTIES, CESS ETC.,' AND ' LEAVE ENCASHMENT' RESPECTIVELY. HOWEVER, THE SAME WERE NOT PAID EVEN BEFORE FILING OF THE RETURN U/S 139(1) OF THE ACT AND THEREFORE IT I S NOT AN ALLOWABLE EXPENDITURE U/ S 438. IN VIEW OF THE ABOVE, AN AMOU NT OF RS.4,93,266/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME/LOSS OF THE ASSESSEE. ADDITION: RS.4,93,266/-' 5. SUBMISSION OF THE APPELLANT: THE APPELLANT IN IT S APPEAL PAPERS SUBMITTED FOLLOWING ARGUMENTS: 'THE APPELLANT FILED A RETURN OF INCOME DECLARING A LOSS OF RS.201,87,118/-. THE ASSESSMENT WAS TAKEN UP FOR SC RUTINY AND THE INCOME IS DETERMINED AT RS.5,13,89,067/- WHILE PASS ING THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS DISALLOW ED INTEREST EXPENDITURE OF RS. 6,90,10,878/- U/S 438 THOUGH NON E OF THE LOANS WERE BORROWED FROM BANK'S OR FINANCIAL INSTITUTIONS AND PROVISIONS OF SECTION 43B ARE NOT AT ALL ATTRACTED. THE ASSESSING OFFICER DISALLOWED RS.4,87,590/- BEING RATES AND TAXES EVEN THOUGH PRO OF OF PAYMENT WAS FILED. HE HAS DISALLOWED LEAVE SALARY OF RS.5,6 76/- THOUGH THE SAME WAS DISALLOWED BY THE APPELLANT ITSELF IN THE RETURN. FURTHER HE HAS NOT SET OFF THE BROUGHT FORWARD LOSSES AGAINST THE INCOME DETERMINED. AGGRIEVED BY THE ABOVE, THE APPELLANT P REFERS THIS APPEAL. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPE LLANT SUBMITTED THE FOLLOWING WRITTEN SUBMISSION IS AS UNDER: 'THE APPELLANT IS A STATE GOVERNMENT COMPANY AND IT FILED A RETURN DECLARING LOSS OF RS. 1,81,15,080/- FOR ASSESSMENT YEAR 2016-17. THE RETURN WAS PICKED UP FOR SCRUTINY AND THE INCOME IS DETERMINED AT RS.5,13,89,067/- AND A DEMAND OF RS.172,90,196 HAS BEEN RAISED. ITA NO. 1239/HYD/2019 :- 4 -: THE MAJOR DISALLOWANCE MADE BY THE ASSESSING OFFICE R 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 T HUS ATTRACTING DISALLOWANCE U/S 43B. IN THIS REGARD IT IS SUBMITTE D THAT THE INTEREST IS NOT A CONTINGENT LIABILITY AS IT IS PAYABLE AT T HE CONTRACTED RATE ON THE AMOUNT BORROWED. THERE IS NO CONTINGENCY INVOLV ED 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 ACCOUN TED IN THE BOOKS AS EXPENDITURE WHETHER ACTUALLY PAID OR NOT. AS REGARDS SECTION 43B IS CONCERNED, A READING OF T HE SAID SECTION CLEARLY SHOWS THAT THE SAID SECTION IS APPLICABLE O NLY TO LOANS BORROWED FROM BANKS AND FINANCIAL INSTITUTIONS AND NOT ANY AND EVERY LENDER. IN THE CASE OF THE APPELLANT, THE LOA NS BORROWED ARE FROM GOVERNMENT OF A.P AND SOME GOVERNMENT COMPANIE S. THEREFORE, THE PROVISIONS OF SECTION 43B ARE NOT AT ALL APPLIC ABLE AND THE DISALLOWANCE IS ERRONEOUS. SECONDLY THE ASSESSING OFFICER HAS DISALLOWED RS.4, 93,266 U/S 43B BEING RATES AND TAXES EVEN THOUGH EVIDENCE HAS BEEN FILED BEFORE HIM FOR HAVING PAID THE SAME. THIS AMOUNT INCLUDED RS.5 ,676 BEING LEAVE ENCASHMENT. THE ASSESSEE ITSELF DISALLOWED THE SAME IN THE RETURN AND HENCE DISALLOWING THE SAME AMOUNTED TO DOUBLE D ISALLOWANCE. HENCE IT IS SUBMITTED THAT BOTH THE ABOVE DISALLOWA NCES MADE BY THE ASSESSING OFFICER ARE DEVOID OF MERIT. 6. THE DECISION: THE SIMILAR ISSUE AROSE IN THE APPELLANT'S OWN CASE FOR A.Y.2014-15 AND THE CIT(A)-12, HYDERABAD VIDE APPEAL NO.10235/2 018-19, DATED 25.01.2019 ADJUDGED THE ISSUED IN THE APPELLANT'S F AVOUR. THE RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED AS UNDER:- 4.1. THE APPELLANT HAS RAISED 3 GROUNDS. ALL T HE GROUNDS ARE RELATED TO THE DISALLOWANCE U/S.43B OF RS.6,83, 24,520/- ONLY. THE OTHER ADDITIONS ARE NOT CONTESTED IN APPEAL. TH E SPECIFIC GROUND IS TAKEN UP FOR DETAILED DISCUSSION AND DISPOSAL, I N THE ENSUING PARAGRAPHS OF THIS ORDER. 5. DISALLOWANCE U/S.43B OFRS.6,83,24,520/-: 5.1. THE ASSESSING OFFICER MADE THE ADDITION, STATI NG AS UNDER: '4.5 WITH REGARD TO THE FOLLOWING EXPENDITURE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE DISALLO WED UNDER SECTION 43B OF THE ACT. ITA NO. 1239/HYD/2019 :- 5 -: S. NO DETAILS AMOUNT IN RS. REMARKS 1 INTEREST TO APRDC 3,00,00,000 INTEREST PROVISION MADE, NO INCOME TAX DEDUCTED DURING THE YEAR, INCOME TAX WILL BE DEDUCTED AT THE TIME OF PAYMENT 2 INTEREST TO APCSC 2,18,55,357 INTEREST PROVISION MADE, NO INCOME TAX DEDUCTED DURING THE YEAR, INCOME TAX WILL BE DEDUCTED AT THE TIME OF PAYMENT 3 INTEREST ON LOAN FROM GOVT. OF AP 1,50,00,000 INTEREST PROVISION MADE. THIS PERTAINS TO GOVERNMENT. NO INCOME TAX DEDUCTED. 4 INTEREST ON LOAN FROM GOVT. OF AP (BOBBILI SETHANAGA RAM) 11,71,443 INTEREST PROVISION MADE. THIS PERTAINS TO GOVERNMENT. NO INCOME TAX DEDUCTED. 5 INTEREST ON PURCHASE TAX LOAN 2,97,720 INTEREST PROVISION MADE. THIS PERTAINS TO GOVERNMENT. NO INCOME TAX DEDUCTED. TOTAL 6,83,24,520 4.5.1 IN RESPONSE, SRI G.PRASAD, CA AND AR OF THE A SSESSEE REPLIED THROUGH E-MAIL ON 6.1.2016 AS UNDER: WE REPRODUCE SECTION 43B HERE UNDER TO THE EXTENT APPLICABLE. 43B NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF D. ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON A NY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPOR ATION IN ACCORDANCE WITH THE TERMS-AND CONDITIONS OF THE AGR EEMENT GOVERNING SUCH LOAN OR BORROWING SHALL BE ALLOWED IRRESPECTIV E OF THE PREVIOUS YEAR IN WHICH LIABILITY TO PAY SUCH SUM. WAS INCURR ED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED 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 T O 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 A PRDC AND APCSC. WE THEREFORE SUBMIT ONCE AGAIN THAT EXCEPT I NTEREST PAID TO BINNY LIMITED ALL OTHER INTEREST IS ALLOWABLE.' 4.5.2 THE ABOVE SUBMISSIONS OF THE ASSESSEE IS EXAM INED AND NOT ACCEPTABLE FOR THE FOLLOWING REASONS: ITA NO. 1239/HYD/2019 :- 6 -: I. THE INCOME FROM THE PROFITS AND GAINS OF BUSINES S OR PROFESSION IS TO COMPUTED UNDER THE PROVISIONS OF SEC. 28 R.W.S.2 9 OF THE ACT. THE PROVISIONS OF SECTION SAYS THAT THE INCOME REFERRED TO IN SECTION 28 SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 30 TO 43D OF THE ACT. UNDER THE PROVISIONS OF SECTION 43B OF THE ACT THE INTEREST EXPENDITURE IS ALLOWABLE IN TH E COMPUTATION OF INCOME ONLY ON ACTUAL PAYMENT. IN THE PRESENT CASE, THE ASSESSEE HAS, NOT MADE THE PAYMENT. HENCE, THE INTEREST EXPE NDITURE CLAIMED BY THE ASSESSEE OF RS.6,83,24,520/- IS NOT AN ALLOW ABLE EXPENDITURE AND NEEDS TO BE DISALLOWED. II. THE ASSESSEE IN ITS SUBMISSION STATES THAT THE PROVISIONS OF SEC.43B(D) SHOWS THAT INTEREST PAYMENT APPLIES ONLY TO BORROWINGS FROM FINANCIAL INSTITUTIONS, SFCS AND IDCS ONLY AND NONE ELSE. THE BORROWING ON WHICH INTEREST-AS. VOID BY THE ASSESSE E ARE FROM GOVERNMENT OF AP. AND GOVERNMENT CORPORATIONS LIKE APRDC AND APCSC. HOWEVER IN THE INSTANT CASE THE' APRDC AND A PCSC ARE NOT COME UNDER THE PURVIEW OF STATE FINANCIAL CORPORATI ON AND STATE INDUSTRIAL INVESTMENT CORPORATION, HENCE THE ABOVE INSTITUTIONS DOES NOT FIT INTO THE PROVISIONS OF SECTION 43B(D). HENC E, THE CONTENTION OF THE ASSESSEE IS REJECTED ON THIS COUNT. III. WITHOUT PREJUDICE TO THE ABOVE PROPOSITION, TH E ASSESSEE ITSELF STATED INT EH BREAKUP STATEMENT THAT THE ABOVE AMOU NTS ARE INTEREST PROVISION MADE. UNDER THE PROVISIONS OF THE ACT A NY PROVISION FOR EXPENDITURE COULD NOT BE ALLOWED UNLESS CRYSTALLIZE D. HENCE, THE ARGUMENT OF THE ASSESSEE IS REJECTED, ON THIS COUNT ALSO. IN VIEW OF THE ABOVE DISCUSSION, INTEREST PROVISION OF RS.6,83,24,520/- IS DISALLOWED AND ADDED TO THE TOT AL INCOME. 5.2. DURING THE COURSE OF APPEAL PROCEEDINGS, THE A PPELLANT'S AR FIELD WRITTEN SUBMISSIONS, CONTESTING THE SAID DISALLOWAN CE AS UNDER: 'THE APPELLANT HAD TAKEN LOANS FROM GOVERNMENT OF A NDHRA PRADESH AND ALSO FROM GOVERNMENT CORPORATIONS TO MEET ITS W ORKING CAPITAL REQUIREMENTS. INTEREST ON SUCH LOANS HAD BEEN PROVI DED IN THE BOOKS AT THE AGREED RATES OF INTEREST. SUCH INTEREST AND LOANS WERE UNPAID DUE TO FINANCIAL STRINGENCY. AT THE TIME OF ASSESSM ENT THE ATTENTION OF THE ASSESSING OFFICER WAS DRAWN TO THE PROVISIONS O F SECTION 43B(D) AND. (E) WHICH ARE REPRODUCED HEREUNDER: CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT: 43B 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE' UNDER TH IS 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 CORPOR ATION, IN ITA NO. 1239/HYD/2019 :- 7 -: ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGR EEMENT GOVERNING SUCH LOAN OR BORROWING, [OR] E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON A NY [LOAN OR ADVANCE] FROM A SCHEDULED BANK FOR A CO-OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO -OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK IN ACCORDAN CE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN [OR ADVANCES], [OR] SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF T HAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. AS CAN BE SEEN FROM THE ABOVE SECTION, THE DISALLOW ANCE WILL APPLY ONLY TO LOANS BORROWED FROM BANKS, FINANCIAL INSTIT UTIONS AND COOPERATIVE BANKS ETC AND NOT FROM STATE GOVERNMENT OR OTHER GOVERNMENT CORPORATIONS. HENCE THE SECTION HAS NO A PPLICATION TO- THE FACTS OF THE CASE. FURTHER THE ASSESSING OFFICE R STATED THAT UNDER THE PROVISIONS OF THE ACT, ANY PROVISION FOR EXPEND ITURE COULD NOT BE ALLOWED UNLESS CRYSTALLIZED. IT IS TO SUBMIT THAT T HE COMPANY HAS TO NECESSARILY FOLLOW MERCANTILE SYSTEM OF ACCOUNTING AND PROVISION HAS TO BE MADE FOR ALL KNOWN LIABILITIES. SINCE PAYMENT OF INTEREST IS A CONTRACTUAL LIABILITY, THE SAME IS PROVIDED IN THE BOOKS AND FURTHER IT HAS TO BE ALLOWED AS EXPENDITURE WHETHER IT IS PAID OR NOT SUBJECT, OF COURSE, TO STATUTORY LIMITATIONS LIKE- PF, SALES TA X, AND INTEREST TO SPECIFIED ENTITIES. HENCE WE SUBMIT THAT THE ACTION OF THE ASSESSING OF FICER IS CONTRARY TO THE PROVISIONS OF THE ACT.' 5.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER OF THE ASSESSING OFFICER. SECTION 43B OF THE INCOME TAX ACT READS AS UNDER: 43B 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE' UNDER TH IS ACT 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 CORPOR ATION, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGR EEMENT GOVERNING SUCH LOAN OR BORROWING, [OR] E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON A NY [LOAN OR ADVANCE] FROM A SCHEDULED BANK LOR A CO-OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK] IN ACCORDA NCE WITH THE ITA NO. 1239/HYD/2019 :- 8 -: TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN LOR ADVANCES], [OR] SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF T HAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM.' ' AS CAN BE SEEN FROM A PLAIN READING OF THE SECTION, IT APPLIES TO INTEREST PAYABLE ON LOANS TAKEN FROM- PUBLIC FINANC IAL. INSTITUTIONS, STATE FINANCE CORPORATION OR STATE INDUSTRIAL INVES TMENT CORPORATION, AND NOT TO ALL INTEREST PAYMENTS MADE TO STATE GOVE RNMENT. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HIM SELF OBSERVED THAT THE BORROWINGS ON WHICH INTEREST IS PAID BY THE ASS ESSEE ARE FROM GOVERNMENT OF A.P. AND GOVERNMENT COR ORATIONS LIKE APRDC AND APCSC. HOWEVER IN THE INSTANT CASE THE AP DC AND AP CSC ARE NOT COME UNDER THE PURVIEW OF STATE FINANCIAL CORPORATI ON 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 (IT A NO. 6452/DEL/2014), WHILE DECIDING A SIMILAR ISSUE, OB SERVED 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. I N VIEW OF THIS CTT(A) RESTRICTED THE DISALLOWANCE TO RS. '15,24,10 0/- ONLY. IN ITA NO. 6157/DEL/2012 FOR ASSESSMENT YEAR 2007-08 IN PA RA NUMBER OF 7 OF THE ORDER IT IS HELD THAT IF THE INTEREST IN Q UESTION IS PAYABLE TO GOVERNMENT OF INDIA AND UTTAR PRADESH GOVERNMENT, S ECTION 43BFDL DOES NOT APPLY. NO OTHER CONTRARY DECISION WAS BROU GHT TO OUR NOTICE. IN VIEW OF THIS, FOLLOWING THE DECISION OF COORDINA TE BENCH, WE REVERSE THE FINDING' OF CIT(A) CONFIRMING THE DISALLOWANCE U/S 43B(D) OF RS. 1524100/-.' IN VIEW THEREOF, SECTION 43B WILL NOT APPLY TO INTE REST PAYMENTS TO GOVERNMENT OF AP AND TO GOVERNMENT CORPORATION APRD C AND APCSC. IT IS NOT CLEAR AS TO WHOM THE INTEREST ON P URCHASE TAX LOAN IS PAYABLE TO. THE AO. IS THEREFORE DIRECTED TO DELETE THE ADDITION TO THAT EXTENT, AFTER VERIFYING WHICH LOANS HAVE BEEN TAKEN FROM STATE GOVERNMENT. THE APPELLANT WOULD THEREFORE GET RELIE F TO THAT EXTENT. 6. IN THE RESULT, THE APPEAL OF THE APPELLANT FOR T HE A.Y:2014-15 IS PARTLY ALLOWED.' ITA NO. 1239/HYD/2019 :- 9 -: IN VIEW OF THE ABOVE ADJUDICATION, AS THE RECIPIENT ENTITIES OF INTEREST IN QUESTION REMAIN THE SAME FOR THE SL.NO.1 TO 5 OF THE ITEMS MENTIONED IN PARA 4 OF PRESENT ASSESSMENT ORDER, AS IN A.Y. 2014-15, THEREFORE, THE SAME IS ALLOWED TO THE EXTENT OF ABO VE, HOWEVER IT IS SEEN THAT THE AS REGARDS INTEREST PAID TO BINNY LTD ., THE REMARKS MENTIONED ARE THAT THE INTEREST WAS FULLY RECOVERED BY THE INCOME TAX DEPARTMENT ON ACCOUNT OF PRESUMABLY RECOVERY PROCEE DINGS. IF THE SAID AMOUNT WHICH WAS DUE ON ACCOUNT OF INTE REST PAYMENT BY THE APPELLANT WAS RECOVERED FULLY BY THE INCOME TAX DEPARTMENT, THEN THERE WAS NO OPTION LEFT WITH THE APPELLANT TO DEDUCT TDS ON THE SAME, AS THE APPELLANT COULD NOT HAVE FURTHER DEDUC TED TDS AS NOTHING WAS DUE TO BINNY LTD. IN THE BOOKS OF THE A PPELLANT HOWEVER THE APPELLANT IS DIRECTED TO PROVIDE FULL DETAILS T O THE AO AND IF THE SITUATION STATES OTHERWISE, THEN OBVIOUSLY THE APPE LLANT WAS LIABLE TO DEDUCT TDS. IN VIEW OF THE ABOVE DIRECTIONS, THE AP PELLANT IS DIRECTED TO FILE THE LEDGER BEFORE THE AO AND THE AO IS DIRE CTED TO TAKE ACTION ACCORDINGLY. TO SUM UP THE GROUND NO. 2 IS PARTLY ALLOWED . 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS AGAINST AND IN SUPPORT OF THE CIT(A) FINDING S DELETING THE IMPUGNED SECTION 43B INTEREST DISALLOWANCE. IT IS N OT IN DISPUTE THAT THE CIT(A) HEREIN HAS GRANTED PART RELIEF TO THE ASSESSEE QUA INTEREST PAYMENTS MADE TO APRDC AND APCSC (SUPRA) ONLY THAT THEY FALL IN THE EXEMPTION MECHANISM IN SECTION43B(D) OF THE ACT. SINCE THE PAYE ES ARE ALREADY COVERED BY HIS ORDER IN SAID PRECEDING ASSE SSMENT YEAR AND ALSO THEY FALL IN THE EXEMPT CATEGORY OF RECIPIEN TS ONLY. WE MAKE IT CLEAR THAT THE REVENUE IS FAIR ENOUGH IN ITS G ROUNDS IN NOT DISPUTING THE STATUS OF THE TWIN RECIPIENTS HEREINABO VE. WE THUS QUOTE THE HON'BLE APEX COURTS LARGER BENCHS DECISION IN CIT VS. K.Y.PILLIAH (1967) [63 ITR 411] (SC) THA T THE TRIBUNAL NEED NOT RECORD INDEPENDENT FINDINGS ON ITS OWN IF IT E XPRESSES ITS COMPLETE AGREEMENT WITH THE FIRST APPELLATE AUTHORI TYS CONCLUSION(S) UNDER CHALLENGE. WE HOLD IN THIS FACTU AL ITA NO. 1239/HYD/2019 :- 10 -: BACKDROP THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNE D 43B DISALLOWANCE PERTAINING TO THESE TWIN PAYEES/CORPORATIO NS. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE FAILS ACCORD INGLY. 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 24-03-2021 TNMM ITA NO. 1239/HYD/2019 :- 11 -: COPY TO : 1.DCIT, CIRCLE-2(2), HYDERABAD. 2.M/S.THE NIZAM SUGARS LIMITED, #5-10-174, SHAKAR BHAVAN, FATHEMAIDAN ROAD, SAIFABAD, HYDERABAD. 3.CIT(APPEALS)-2, HYDERABAD. 4.PR.CIT-2, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.