Anrak Aluminium Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(1), Hyderabad

ITA 1378/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6818 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 18-02-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 29-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Opportunity of being heard
• Section: 43B; 143(3); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. 1378 /H/20 1 8 ASSESSMENT YEAR: 2014 - 15 ANRAK ALUMINIUM LTD., HYDERABAD. PAN AAGCA 2333M VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHURAM REVENUE BY: SHRI YVST SAI DATE OF HEARING: 1 6 /0 2 /2021 DATE OF PRONOUNCEMENT: 09 /04/2021 O R D E R PER L.P. SAHU, A.M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST CIT( A ) - 1 , HYDERABADS ORDER DATED 1 2 / 0 2 /201 8 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT WHEREIN ITS GRIEVANCE IS THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING UNPAID INTEREST TO THE TUNE OF RS. 13,36,34,769/ - U/S 43B OF THE ACT. ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 2 - : 2. BRIEFLY THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY , ENGAGED IN THE BUSINESS OF MANUFACTURING OF ALUMINUM , FILED ITS RETURN OF INCOME ON 27.11.2014 FOR THE A.Y.2014 - 15 DECLARING A LOSS OF RS. ( - ) 27,26,68,435 / - UNDER NORMAL PROVISIONS AND ( - ) RS.40,64,54,037 / - UNDER THE PROVISIONS OF SECTION 115J B OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES WERE ISSUED U / S.143(2) & U / S.142(1). THE ASSESSMENT WAS COMPLETED U / S.143(3) ON 30.12.2016 BY DETERMINING TOTAL INCOME AT ( - ) RS.13,90,33,666 / - . 2 .1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY WAS ASKED TO SUBMIT DETAILS OF INTEREST EXPENSES DEBITED TO THE P&L ACCOUNT TO THE TUNE OF RS.33,81,76,449/ - . THE ASSESSEE SUBMITTED THAT THE TOTAL INTEREST AMOUNT PAID TO VARIOUS BANKS ON TERM LOANS WER E SHOWN AT RS.312,23,29,409/ - . IT WAS STATED THAT OUT OF TOTAL INTEREST ACCRUED FOR THE F.Y.2013 - 14 AN INTEREST AMOUNT OF RS. 278,41,52,690/ - WAS TRANSFERRED TO CAPITAL WORK IN PROGRESS. THE BALANCE AMOUNT OF RS.33,81,76,449/ - WAS CHARGED TO P&L ACCOUNT. T HE ASSESSEE SUBMITTED THAT 10.83% OF TOTAL INTEREST ACCRUED DURING F.Y.2013 - 14 WAS CHARGED TO P&L ACCOUNT AND BALANCE 89.17% WAS CAPITALIZED. IT WAS CLARIFIED THAT OUT OF OUTSTANDING INTEREST PAYABLE AS ON 31.03.2014 AMOUNTING TO RS.61,78,77,331/ - AN AMOUN T OF RS.55,16,67,792/ - HAS BEEN PAID BEFORE DATE OF FILING THE ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 3 - : RETURN OF INCOME U/S.139(1) OF IT ACT LEAVING UNPAID AMOUNT OF RS.13,36,34,769/ - , THE DETAILS OF WHICH ARE AS UNDER: 1. L IC OF INDIA 10,05,79,814/ - 2. UNITED BANK OF INDIA 3,30,54,955/ - TOTAL INTEREST UNPAID 13,36,34,769/ - 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) UPHELD THE ORDER OF AO FOR THE FOLLOWING REASONS: A) THE REASON FOR CAPITALIZING IN PERCENTAGE HAS NOT BEEN CLARIFIED BEFORE ME. HENCE THE INTEREST COMPONENT IS INCLUSIVE OF OTHER EXPENDITURE ALSO. B) THE INTEREST HAS NOT BEEN PAID BY THE APPELLANT EVEN BY THE TIME OF FILING OF APPEAL. THIS HAS ALSO BEE N BROUGHT BY THE ASSESSING OFFICER. C) THE LIABILITY TO PAY INTEREST IS ON THE BASIS OF AN ACTUAL PAYMENT, SINCE THIS EXPENDITURE HAS NOT BEEN INCURRED IT CANNOT BE ALLOWED DURING THE RELEVANT YEAR AS IT WAS NOT PAID. 4. AGGRIEVED BY THE ORDER OF CIT( A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. THE LD. AR OF T HE SUBMITTED THAT O UT OF THE ENTIRE TERM LOAN INTEREST OF RS.312,23,29,409/ - ONLY AN AMOUNT OF RS.33,81,76,449/ - WAS CHARGED TO PROFIT & LOSS A/C, WHICH CONSTITUTES 10.83% OF TOTAL INTEREST EXPENSES AND THE BALANCE 89.17% INTEREST AMOUNT OF RS.278,41,52,960/ - WAS TRANSFERRED TO CAPITAL WORK IN PROGRESS IN THE PROPORTION OF ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 4 - : ASSETS CAPITALIZ ED. HE SUBMITTED THAT T HE COMPANY HAS NOT PAID INTEREST ON TERM LOANS OBTAINED FROM LIC OF INDIA AND UNION BANK OF INDIA TO THE EXTENT OF RS.13,36,34,769/ - . AS STATED ABOVE, THE COMPANY HAS APPORTIONED THE TOTAL INTEREST INCURRED DURING THE FINANCIAL YEAR 2013 - 14 TO PROFIT & LOSS A/C AND CAPITAL WORK IN PROGRESS IN THE RATIO OF 10.83:89.17. OUT OF THE UNPAID INTEREST OF THE UNPAID INTEREST OF RS.13,36,34,769/ - AN AMOUNT OF RS.1,44,73,851/ - WAS CHARGED TO PROFIT & LOSS A / C BASED ON THE % OF ASSETS CAPITALIZE D AND THE BALANCE UNPAID INTEREST OF RS.11,91,60,918/ - WAS DEBITED TO CAPITAL WORK TO PROGRESS AS THE ASSETS WERE UNDER CONSTRUCTION / ERECTION. HE SUBMITTED THAT A S PER THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT,1961 , INTEREST EXPENSES ARE ALLOWED AS DEDUCTION ONLY ON PAYMENT BASIS AND ANY UNPAID INTEREST CLAIMED AS EXPENSES SHALL BE DISALLOWED IN COMPUTATION OF TOTAL INCOME. ACCORDINGLY, UNPAID INTEREST EXPENSES OF RS. 1 ,44,73,851/ - DEBITED TO P&L A/C WERE ADMITTED TO BE DISALLOWED U/S 43B. HE CONTENDED THAT THOUGH THE ABOVE POINTS WERE EXPLAINED DURING THE ASSESSMENT PROCEEDINGS, THE AO DISALLOWED THE ENTIRE UNPAID INTEREST EXPENSES OF RS. 13,36,34,769/ - . HE PRAYED FOR THE DELETION O F THE DISALLOWANCE. 6. ON THE OTHER HAND, LD. DR BESIDES RELYING ON THE ORDERS OF REVENUE AUTHORITIES SUBMITTED THAT THE LIABILITY TO PAY INTEREST IS ON THE BASIS OF AN ACTUAL PAYMENT, SINCE THIS ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 5 - : EXPENDITURE HAS NOT BEEN INCURRED IT CANNOT BE ALLOWED DUR ING THE RELEVANT YEAR AS IT WAS NOT PAID. THEREFORE, THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW BE CONFIRMED. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. WE FIND TH AT THE BEFORE DISALLOWING THE UNPAID INTEREST EXPENSES, THE AO OBSERVED THAT T HE ASSESSEE COMPANY FAILED TO FURNISH ANY LOGIC IN APPORTIONING AT THE RATIOS MENTIONED BY ITSELF. IN ABSENCE OF ANY RELEVANT MATERIAL SUPPORTING THAT THE AMOUNT DEBITED TOWARDS INTEREST AMOUNTING TO RS.33.81 CRORES I N P&L ACCOUNT, IT IS PRESUMED THAT THE UNPAID INTEREST ALSO INCLUDED IN THE DEBITED AMOUNT TO P&L ACCOUNT. AS PER THE PROVISIONS OF CLAUSE(D) OF SECTION 43B OF IT ACT ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON AN Y LOAN FROM ANY PUBLIC FINANCIAL INSTITUTION IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF AGREEMENT GOVERNING SUCH LOAN IS ALLOWABLE AS DEDUCTION IF SUCH SUM IS ACTUALLY PAID. IN THE INSTANT CASE THE ASSESSEE COMPANY FAILED TO PAY THE INTEREST AMOUNT AS DETAILED ABOVE OF RS. 13,36,34,769/ - ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1) OF THE ACT. THE PROVISO CLEARLY STATES THAT THE DEDUCTION IS ALLOWABLE IF THE AMOUNT IS ACTUALLY PAID. THEREFORE, WE ARE OF THE VIEW THAT ONE MORE OP PORTUNITY MAY BE GIVEN TO ASSESSEE TO SUBSTANTIATE ITS CLAIM BY FILLING DOCUMENTARY EVIDENCE BEFORE THE AO. ACCORDINGLY, WE REMIT ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 6 - : THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN DISPUTE BY EXAMINING THE MATERIAL WHICH WILL BE P UT - FORTH BY THE ASSESSEE BEFORE HIM AND IN ACCORDANCE WITH LAW AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CLAIM BY FILING DOCUMENTARY EVIDENCE BEFORE THE AO. THUS, THE GROUND RA ISED BY THE ASSESSEE ON THIS ISSUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL , 2021 . SD/ - SD/ - (S . S . GODARA) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 9 TH APRIL , 20 2 1 . KV ITA NO . 1378 /H YD/ 20 1 8 M/S ANRAK ALUMINIUM LTD ., HYD. : - 7 - : C OPY TO : 1 M/S ANRAK ALUMINIUM LTD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2 DC I T , CIRCLE 1(1) , IT TOWERS, AC GUARDS, HYDERABAD . 3 CIT( A ) - 1 , HYDERABAD 4 PR. CIT 1. HYDERABAD. 5 ITAT, DR, HYDERABAD 6 GUARD FILE.