The Calcutta Tramways Company(1978) Limited, Kolkata V. DCIT, Circle-4(2), Kolkata, Kolkata

ITA 1850/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0792 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 21-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: A BISWAS
• Keywords: Difference of opinion; Notional interest; Change of opinion
• Section: 148

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1850 / KOL / 20 16 ASSESSMENT YEAR :2008-09 THE CALCUTTA TRAMWAYS COMPANY (1978) LTD. 12 R.N. MUKHERJEE ROAD, KOLKATA-700 001 [ PAN NO.AABCT 7674D ] V/S . DCIT, CIRCLE-4(2), AYKAR BHAVAN, 4THFLOOR, P-7, CHOWRINGHEE SQUARE,KOLKTAA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI A. BISWAS, FCA /BY RESPONDENT SHRI P.K. SRIHARI, CIT-DR /DATE OF HEARING 15-11-2018 /DATE OF PRONOUNCEMENT 30-11-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-2 KOLKATAS OR DER DATED 05.08.2011, PASSED IN CASE NO.928/CIT(A)-2/14-15 U/S 147/154143 (3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE RAISES FOLLOWING SUBSTANTIVE GROUND IN IT INSTANT APPEAL:- 1. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) WRONGLY AND ARBITRARILY DID NOT CONSIDER IN THE ORDER UNDER APPEAL THE CONTENTION OF THE APPELLANT AS TO THE (A) ISSUANCE OF NOTICE UNDER SECTION 148 DATED 22.0 3.2013 (B) NON-FURNISHING OF THE DATE OF RECORDING OF THE REASON FOR ISSUANCE OF THE NOTICE (C) NON-DISPOSAL OF THE OBJECTION OF THE RE-ASSESSM ENT PROCEEDINGS FILED BY THE APPELLANT AND (D) THE CHANGE OF OPINION ON THE ISSUES ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 2 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) FAILED TO CONSIDER THE FACT (A) THAT THE SANCTION LETTER OF LOAN STATES THAT R EGARDING THE TERMS AND CONDITIONS OF THE LOAN SANCTIONED HEREBY A FURTHER G.O WILL BE ISSUED. (B) THAT AS PER NOTIFICATION NO. 3173-FB DATED 30.0 3.2012 ISSUED BY THE GOVERNMENT OF WEST BENGAL, FINANCE DEPARTMENT, BUDG ET BRANCH THE RATE OF INTEREST FOR THE FINANCIAL YEAR WAS 11.50% PER ANNUM FOR LOAN TO STATE TRANSPORT CORPORATIONS. (C) THAT IN NOTE NUMBER 8 OF THE NOTES ON ACCOUNTS THE FACT ABOUT CHARGING INTEREST ENDING DETERMINATION OF RATE OF INTEREST OF 537.34 LAKHS FOR THE YEAR UNDER APPEAL AS WELL AS ACCUMULA TED PROVISION UPTO 31.03.2006 OF 9,489 LAKHS WERE DISCLOSED. (D) THAT IN THEIR AUDIT REPORT/COMMENTS (I) THE STATUTORY AUDITOR OF THE APPELLANT HAD REPO RTED THAT INTEREST @ 6.25% WAS PROVIDED INSTEAD OF PREVAILING RATE OF 12.50% TO 15.50%, (II) THAT IN FY 2006-07 THE C&AG HAD COMMENTED U/S. 619(4) OF THE COMPANIES ACT 1956 THAT THERE WAS SHORT PROVISI ON OF LIABILITY TOWARDS INTEREST ON GOVERNMENT LOANS UPTO FEBRUARY, 1994. (E) THAT TAX AUDITOR OF THE APPELLANT IN HIS REPORT U/S. 44AB OF IT CT 1961 HAD REPORTED NIL AGAINST SL. NO. 17(K) OF FORM NO.3CD SIGNIFYING THAT ANY LIABILITY OF A CONTINGENT NATURE HAS NOT BEEN DEBITED TO THE P&L A/C. 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (AL) FURTHER ERRED IN NOT TAKING INTO ACCOUNT THE ACCOUNTING STANDARD NOTIFIED UNDER SECTION145(2) OF THE ACT WITH REGARD TO PARA A.(6) (B) ACCRUAL A.(6) (C) CONSISTENCY B.(13)(A) ACCOUNTING ESTIMATE SO MUCH SO THAT HE FAILED TO CONSIDER THAT ESTIMATE D PROVISION MAY BE RECOGNIZED AS ALLOWABLE EXPENDITURE. 4. FOR THAT ON THE FACT AND IN THE CIRCUMSTANCES TH E LEARNED COMMISSIONER OF INCOME TAX (APPEAL) WAS WRONG IN SU STAINING ADDITION OF INTEREST OF 5,37,34,000 ON LOAN FROM GOVERNMENT OF WEST BENGAL. 3. THE ASSESSEE APPEARS TO HAVE PLEADED TWO FOLDED GRIEVANCES IN ITS PLEADINGS. ITS FORMER GRIEVANCE CHALLENGES VALIDITY OF THE RE-ASSESSMENT TO BE WITHOUT JURISDICTION NOT SUSTAINABLE ON ACCOUNT OF NOT FURNISHING OF DATE OF RECORDING OF RE-OPENING REASONS BEFORE ISSUING U/S 148 NOTICE, NON DISPOSAL OF ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 3 OBJECTION AGAINST RE-OPENING BEFORE FAMING THE IMPU GNED RE-ASSESSMENT AS WELL AS TERMING THE SAME TO BE MERE CHANGE OF OPIN ION; RESPECTIVELY. ITS LATTER SUBSTANTIVE GROUND ON MERITS SEEKS TO REVERS E BOTH THE LOWER AUTHORITIES FINDINGS ADDING INTEREST OF 5,37,34,000/- AS INCOME ON LOANS OBTAINED FROM GOVERNMENT OF WEST BENGAL. 4. BOTH THE PARTIES STATE AT THE OUTSET THAT ABOVE LATTER ISSUE ON MERITS PERTAINING TO INTEREST ADDITION ON LOAN AVAILED FRO M THE GOVERNMENT OF WEST BENGAL IS VERY MUCH A RECURRING ONE. THEY PLACE ON RECORD THIS TRIBUNALS ORDER IN ITA NO.590/KOL/2014 DATED 18.10.2017 IN ASSESSEE S CASE ITSELF FOR IMMEDIATE PRECEDING ASSESSMENT YEAR 2007-08 RESTORI NG THE VERY ISSUE BACK TO THE ASSESSING OFFICER AS FOLLOWS:- 3. FIRST WE TAKE ASSESSEES APPEAL IN ITA NO.846/KO L/2014, FOR ASSESSMENT YEAR 2007-08, WHEREIN THE ASSESSEE HAS RAISED THE F OLLOWING GROUNDS OF APPEAL: 1.FOR THAT ON THE FACT AND IN THE CIRCUMSTANCES THE LD. COMMISSIONER OF INCOME TAX(APPEAL) WAS WRONG IN SUSTAINING ADDITION OF INTEREST OF RS.5,37,34,000 ON LOAN FROM GOVT. OF WEST BENGAL. 2.FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APPE AL) FAILED TO CONSIDER THE FACT (A)THAT IN NOTE NUMBER 8 OF THE NOTES ON ACCOUNTS THE FACT ABOUT CHARGING INTEREST PENDING DETERMINATION OF RATE OF INTEREST OF RS.537.34 LAKHS FOR THE YEAR UNDER APPEAL AS WELL A S ACCUMULATED PROVISION UPTO 31.03.2006 OF RS.9,489 LAKHS WERE DI SCLOSED. (B)THAT NEITHER THE STATUTORY AUDITOR OF THE ASSESS EE HAD U/S 227 OF THE COMPANIES ACT 1956 REPORTED NOR THE C&AG HAD COMMEN TED U/S 619(4) OF THE COMPANIES ACT 1956 THAT THE LOAN WAS INTEREST FREE AND/OR THAT INTEREST SHOULD NOT HAVE BEEN DEBITED T O THE P&LA/C AND (C)THAT TAX AUDITOR OF THE ASSESSEE IN HIS REPORT U /S 44AB OF IT ACT 1961 HAD REPORTED NIL AGAINST SL. NO.17(K) OF FOR M NO.3CD SIGNIFYING THAT ANY LIABILITY OF A CONTINGENT NATU RE HAS NOT BEEN DEBITED TO THE P&L A/C. 3.FOR THAT THE LD. COMMISSIONER OF INCOME TAX(APPEA L) FURTHER ERRED IN NOT TAKING INTO ACCOUNT THE ACCOUNTING STANDARD NOTIFIE D UNDER SECTION 145(2) OF THE ACT WITH REGARD TO PARA A.(6)(B) ACCRUAL A.(6)(C) CONSISTENCY B.(13)(A) ACCOUNTING ESTIMATE. 4.FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES T HE LD. COMMISSIONER OF INCOME TAX(APPEAL) WRONGLY AND ARBITRARILY HELD THAT ANY EXPENDITURE CLAIMED ON THE ESTIMATE BASIS FOR AN UNASCERTAINED LIABILITY IS NO T ALLOWABLE DEDUCTION UNDER THE PROVISIONS OF INCOME TAX ACT. 5.THE ASSESSEE CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR AT THE TIME OF HEARIN G OF THIS APPEAL. ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 4 3.1 ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAIS ED A MULTIPLE GROUNDS OF APPEAL , BUT AT THE TIME OF HEARING THE SOLITARY GRIEVANCE O F THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE THAT ADDITION AND CONFIRMED BY THE CIT(A) , WHEREAS THE SAID LOAN WAS PENDING DETERMINATION OF RATE OF INTEREST. 3.2 THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSE SSEE HAS FILED ITS RETURN OF INCOME ON 30.10.2007 DECLARING TOTAL INCOME AT RS.NIL. THE ASSESSEES RETURN OF INCOME WAS DULY PROCESSED U/S 143(1) ON 24.12.2008. THE AS SESSEES CASE WAS SELECTED FOR SCRUTINY U/S 143(2) OF THE ACT AND ASSESSING OFFICE R HAS COMPLETED THE ASSESSMENT BY MAKING ADDITION ON ACCOUNT OF INTEREST EXPENDITU RE ON ESTIMATE BASIS OF RS.537.34 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSES SEE SUBMITTED BEFORE AO THAT AS PER NOTES ON ACCOUNT NO.8, OF ITS FINANCIAL STAT EMENTS, IT HAS BEEN MENTIONED THAT INTEREST WAS PENDING TO BE PROVIDED, THAT IS, INTER EST WAS PENDING BECAUSE RATE OF INTEREST WAS YET TO BE DETERMINED ON THE LOAN OF GO VERNMENT OF WEST BENGAL WHICH WAS DISBURSED TILL FEBRUARY 1994 UNDER PLAN SCHEME. HOWEVER THE PROVISION FOR INTEREST HAD BEEN MADE AT AN ESTIMATED RATE OF 6.25 % P.A. (SIMPLE); INTEREST AND THE SAME WAS CHARGED IN PROFIT AND LOSS ACCOUNT AMOUNTI NG TO RS.537.34 LACS. THE ASSESSEE HAD FURTHER SUBMITTED BEFORE THE AO, VIDE LETTER DATED 07/10/09 THAT AS PER NOTE NO.8 OF ' NOTES TO ACCOUNTS ' OF THE FINANCIAL STATEMENTS, THE LOAN WAS SANCTIONED BY WEST BENGAL GOVERNMENT, WHO IS 100% O WNER OF THE COMPANY, WHEREIN IT WAS NOT MENTIONED THAT THE LOAN WAS INTE REST FREE. ALTHOUGH THE EXACT RATE OF INTEREST WAS NOT INTIMATED BY THE GOVERNMENT OF WEST BENGAL, HOWEVER, DURING THE PERIOD OF LOAN SANCTIONING THE INTEREST ON LOAN VAR IED FROM 6.50 PERCENT TO 12.50 PERCENT (WHICH WOULD ALSO BE EVIDENT FROM THE AUDIT MEMO. NO.RAO/CTC/AUD/2006- 07/3, DT.22/11/2007 OF THE RESIDENT AUDIT OFFICER F ROM THE OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) WEST BENGAL. THEREFORE, THE COMPANY ON A CONSERVATIVE BASIS WAS TAKING THE INTEREST EXPENDITURE @ 6.25% A ND CHARGING THE SAME TO THE PROFIT AND LOSS ACCOUNT. AS THE COMPANY IS FOLLOWIN G THE ACCRUAL SYSTEM OF ACCOUNTING IT HAD TO CONSIDER THE FACT THAT THE LOA N WAS NOT SANCTIONED AS INTEREST FREE. THE SAID FACT WAS DULY DISCLOSED IN THE FINAN CIAL STATEMENTS, WHICH WERE APPROVED BY THE WEST BENGAL GOVERNMENT NOMINATED DI RECTORS. THE FINANCIAL STATEMENTS WERE AUDITED BY THE CAG APPOINTED STATUT ORY AUDITORS AND ALSO VETTED BY THE COMMERCIAL AUDIT WING OF THE COMPTROLLER & AUDI TOR GENERAL OF LNDIA. THE STATUTORY AUDITORS AND THE COMMERCIAL AUDIT WING OF CAG NEVER OBJECTED IN PRINCIPLE TO ACCOUNT FOR THE INTEREST ON THE SAID LOAN AND TH E CHARGING OF THE INTEREST EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE AO AFTER GOING THROUGH THE REPLY OF TH E ASSESSEE HELD THAT THE EXPENDITURE CLAIMED ON ESTIMATE BASIS IS NOT AN ALL OWABLE EXPENDITURE AS PER PROVISION OF I.T. ACT, 1961. THEREFORE, IT PROVES T HAT THE SUM OF RS.537.34 LACS DEBITED AS INTEREST ON PLAN LOAN TO THE PROFIT AND LOSS ACCOUNT, WAS MERELY A PROVISION AND THE ACTUAL QUANTUM OF THE LIABILITY O N THIS PART OF PLAN LOAN WAS UNASCERTAINABLE DURING THE YEAR AND ANY YEAR PRIOR TO THIS. AS PER INCOME TAX ACT, PROVISION FOR ANY UNASCERTAINABLE LIABILITY IS NOT AN ADMISSIBLE EXPENDITURE. THE ASSESSEE COULD NOT PRODUCE ANY CORROBORATIVE EVIDEN CE TO PROVE THE REASON BEHIND CHARGING INTEREST @ 6.5%. THEREFORE, THE AO DISALLO WED THE NOTIONAL INTEREST EXPENDITURE CLAIMED ON ESTIMATE BASIS OF RS.537.34 LACS AND ADDED BACK TO TOTAL INCOME OF THE ASSESSEE. 3.3 AGGRIEVED BY THE ORDER O THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITI ON MADE BY THE ASSESSING OFFICER. THE LD. CIT OBSERVED THAT THE DISALLOWANCE OF RS.5, 37,34,000/- IN RESPECT OF INTEREST, AS THE SAID INTEREST HAD BEEN CLAIMED BY THE ASSESS EE ON LOAN RECEIVED FROM GOVERNMENT OF WEST BENGAL DISBURSED TILL FEBRUARY, 1994. IT WAS OBSERVED BY THE ASSESSING OFFICER, THAT THE PROVISION FOR THE INTER EST HAD BEEN MADE ON ESTIMATED RATE OF 6.25%. IN REPLY TO THE QUERY RAISED BY THE ASSES SING OFFICER, IT WAS STATED BY THE ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 5 ASSESSEE THAT THE LOAN HAD BEEN SANCTIONED BY THE W EST BENGAL GOVERNMENT WHO WAS 100% OWNER OF THE COMPANY. AT THE TIME OF SANCT ION, HAD IT HAD NOT BEEN MENTIONED THAT THE LOAN WAS INTEREST FREE. ALTHOUGH THE EXACT RATE OF INTEREST HAD NOT BEEN INTIMATED BY THE GOVERNMENT, IN THE PERIOD OF SANCTIONING OF LOAN, THE INTEREST RATE VARIED FROM 6.5% TO 12.5%. HENCE THE COMPANY P ROVIDED INTEREST AT THE RATE OF 6.25%. THIS FACT HAD BEEN DULY DISCLOSED IN THE FIN ANCIAL STATEMENTS, WHICH WERE APPROVED BY GOVERNMENT NOMINATED DIRECTORS AS WELL AS AUDITORS. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT EXPENDITURE CLAIMED ON ESTIMATE BASIS WAS NOT AN ALLOWABLE EXPENDITURE UNDER THE PROVISIONS OF LNCOM E TAX ACT. HE THEREFORE DISALLOWED THE CLAIM OF INTEREST ON ACCOUNT OF BEIN G UNASCERTAINED LIABILITY. THE ASSESSEE HAD RE-ITERATED, BEFORE THE CIT(A), TH E SUBMISSION DATED 7.10.2009 IN THE MATTER MADE BEFORE THE ASSESSING OFFICER. IN AD DITION TO THIS, IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IN THE AUDIT CONDUCTED BY C & AG, A COMMENT WAS MADE THAT INTEREST IN RESPECT OF THE UNSECURED LOAN FROM THE GOVERNMENT WAS SHORT PROVISION RESULTING IN UNDERSTATEMENT OF LOSS. THEREFORE IT W AS CONTENDED THAT THE INTEREST PROVIDED BY THE ASSESSEE WAS RATHER ON LOWER SIDE A ND SHOULD BE ALLOWED. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE HELD THAT THE INTEREST UNDER CONSIDERATION HAD BEEN PROVIDED IN RESPECT OF LOANS RECEIVED FROM GOVERNMENT OF WEST BENGAL. LTWAS UNDISPUTED THAT WH ILE SANCTIONING THE LOAN, THE GOVERNMENT HAD NOT SPECIFIED THAT ANY INTEREST WAS TO BE CHARGED. THE ASSESSEE HAD POINTED OUT THAT IT HAD ALSO NOT BEEN MENTIONED THAT THE LOAN WAS INTEREST FREE. THE LD CIT(A) OBSERVED THAT ANY ACTUAL PAYMENT OF I NTEREST HAD ALSO NOT BEEN MADE SO FAR, NOR ANY LETTER OF DEMAND ETC. HAD BEEN RECE IVED FROM GOVERNMENT. THE LOAN WAS FROM THE WEST BENGAL GOVERNMENT WHO IS 100% OWN ER OF THE COMPANY. THUS, IT WAS NOT A CASE THAT THE LOAN WAS FROM, SAY, A BANK OR FINANCIAL INSTITUTION OR NBFC ENGAGED IN BUSINESS OF GIVING LOAN ON INTEREST. THE REFORE IT CANNOT BE SAID THAT THE LOAN HAD BEEN TAKEN ON COMMERCIAL TERMS AND INTERES T WOULD HAVE TO BE NECESSARILY PAID ON THE SAME. LT WAS WELL-KNOWN THAT THE ASSESS EE COMPANY HAD HUGE ACCUMULATED LOSSES AND THE GOVERNMENT, BEING 100% O WNER, MAY VERY WELL DECIDE TO GIVE INTEREST FREE FUNDS TO THE ASSESSEE COMPANY. U NDER THESE CIRCUMSTANCES, IN ABSENCE OF ANY SPECIFIC STIPULATION FOR INTEREST, T HERE CANNOT BE A PRESUMPTION THAT THE ASSESSEE IS LIABLE TO PAY ANY INTEREST. EVEN IF INTEREST WOULD HAVE TO BE PAID, AS LONG AS THE RATE OF INTEREST WAS NOT SPECIFICALLY K NOWN, ANY PROVISION MADE FOR THE SAME REMAINS A PROVISIONAL AND UNASCERTAINED LIABIL ITY. SO FAR AS THE REMARK OF C&AG WAS CONCERNED, WHILE AN AUDITOR MAY MAKE CERTA IN REMARKS BASED ON HIS PERCEPTION, THE SAME CANNOT DETERMINE ALLOWABILITY OF A CLAIM FOR DEDUCTION IN INCOME TAX ASSESSMENT. SUCH ALLOWANCE HAS TO BE CONSIDERED STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT. IT IS WELL SETTLED, T HAT ANY EXPENDITURE CLAIMED ON THE ESTIMATE BASIS FOR AN UNASCERTAINED LIABILITY IS NO T ALLOWABLE DEDUCTION UNDER THE PROVISIONS OF LNCOME TAX ACT. SAME VIEW HAD BEEN TA KEN IN THE DECISION IN THE CASE OF RAJASTHAN STATE MINES AND MINERALS LTD. VS. CIT (RAJ.) 208 LTR 1010 AND A NUMBER OF OTHER CASES. THEREFORE, CONSIDERING THESE FACTUAL POSITION, THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS.537.34 LACS. 3.4 NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A ), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED BEFORE US THAT RATE OF INTEREST ON THE LOAN IS YET TO BE DECIDED. THEREFOR E, THE ASSESSEE HAS BEEN MAKING THE PROVISIONS IN RESPECT OF THE INTEREST ON THE LO AN TAKEN FROM GOVT. OF WEST BENGAL. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT A S PER NOTE NO.8 OF THE NOTES TO ACCOUNTS OF THE FINANCIAL STATEMENTS WHICH CLEARLY STATES THAT PENDING DETERMINATION OF RATE OF INTEREST OF RS.537.34 LAKHS FOR THE CUR RENT YEAR AND ACCUMULATED INTEREST UP TO 31ST MARCH 2006 OF RS.9,489 WERE DISCLOSED. T HEREFORE, THE ASSESSEE UNDER CONSIDERATION SINCE THE RATE OF INTEREST WAS YET TO BE DECIDED BUT ON ESTIMATE BASIS ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 6 THE ASSESSEE MADE THE PROVISION FOR INTEREST FOR TH E ASSESSMENT YEAR UNDER CONSIDERATION AT RS.537.34 LAKH AND ACCUMULATED INT EREST WHICH HAS BEEN COMING SINCE LAST YEARS WAS TO THE TUNE OF RS.9489/- LAKHS . THEREFORE, CURRENT YEAR INTEREST WHICH IS PENDING DETERMINATION OF RATE OF INTEREST AND THE ACCUMULATED PROVISION FOR INTEREST HAS BEEN DULY DISCLOSED BY THE ASSESSEE IN THE BALANCE SHEET. THE LD COUNSEL ALSO POINTED OUT THAT NEITHER STATUTORY AUD ITOR U/S 227 OF THE COMPANIES ACT 1956 NOR THE C&AG HAD COMMENTED U/S 619(4) OF THE C OMPANIES ACT 1956 THAT THE LOAN WAS INTEREST FREE AND THE INTEREST SHOULD NOT HAVE BEEN DEBITED TO P&L A/C. IN ADDITION TO THIS, THE LD. COUNSEL POINTED OUT THAT TAX AUDITOR OF THE ASSESSEE IN THE TAX AUDIT REPORT U/S44AB OF THE I.T. ACT 1961 HAD REPOR TED NIL AGAINST SL. NO.17(K) OF FORM NO.3CD SIGNIFYING THAT ANY LIABILITY OF A CON TINGENT NATURE HAS NOT BEEN DEBITED TO THE P&L A/C. THE LD. CIT(A) DID NOT CONS IDER THE ACCOUNTING STANDARDS NOTIFIED U/S145(2) OF THE ACT. THEREFORE, BY FOLLOW ING THE ACCOUNTING STANDARDS PRESCRIBED U/S 145(2) OF THE ACT, THE ASSESSEE HAS ACCRUED INTEREST ON THE BASIS OF ESTIMATE. THE LD. COUNSEL SUBMITTED THAT THE LOAN S ANCTIONED BY WEST BENGAL GOVERNMENT, 100% OWNER OF THE COMPANY, WHEREIN IT W AS NOT MENTIONED THAT THE LOAN WAS INTEREST FREE. ALTHOUGH, THE EXACT RATE OF INTEREST WAS NOT INTIMATED BY THE GOVERNMENT OF WEST BENGAL, DURING THE PERIOD OF LOA N SANCTIONING, THE MARKET INTEREST ON LOAN VARIED FROM 6.50 PERCENT TO 12.50 PERCENT. THEREFORE, THE COMPANY PROVIDED INTEREST AT THE RATE OF 6.25% ON THE SAID LOAN. THE LD. COUNSEL SUBMITTED THAT THE SAID FACT HAD BEEN DULY DISCLOSED IN THE F INANCIAL STATEMENT WHICH WAS AUDITED BY THE GOVERNMENT AS WELL AS AUDITORS. THE ASSESSING OFFICER HOWEVER OBSERVED THAT EXPENDITURE CLAIMED ON ESTIMATE BASIS IS NOT AN ALLOWABLE EXPENDITURE AS PER PROVISION OF I.T. ACT, 1961. THEREFORE, HE D ISALLOWED THE CLAIM OF THE INTEREST ON ACCOUNT OF UNASCERTAINABLE LIABILITY. HOWEVER, T HE LD. CIT(A) OBSERVED THAT THE COMPANY HAS NOT SPECIFIED THAT ANY INTEREST ON THE LOAN IS TO BE CHARGED. THE ASSESSEE HAD ALSO POINTED OUT BEFORE THE LD. CIT(A) THAT LOAN WAS INTEREST FREE THEREFORE, THE LD. CIT(A) OBSERVED THAT BASED ON TH E FACTS NO ANY INTEREST IS TO BE CHARGED. THE LD. CIT(A) ALSO OBSERVED THAT THE SAID LOAN HAD NOT BEEN TAKEN ON COMMERCIAL TERM. THEREFORE, THE PROVISION FOR INTER EST SHOULD NOT BE ALLOWED AND THE LD. CIT(A) HELD THAT ANY EXPENDITURE CLAIMED ON THE ESTIMATE BASIS FOR AN UNASCERTAINED LIABILITY IS NOT ALLOWABLE DEDUCTION UNDER THE PROVISIONS OF INCOME TAX ACT AND THEREFORE, HE DISALLOWED THE INTEREST CLAIM ED BY THE ASSESSEE AT RS.537.34 LAKHS. THE LD. COUNSEL POINTED OUT THAT THE RATE OF INTEREST IS YET TO BE DECIDED, THEREFORE, HE PRAYED THE BENCH TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE AFTER TAKING INTO A CCOUNT THE RATE OF INTEREST WHICH WOULD BE PROVIDED BY THE GOVT. OF WEST BENGAL. THE LD COUNSEL HAS SUBMITTED BEFORE THE BENCH THAT THEY HAVE MADE AN APPLICATION TO THE GOVT. OF WEST BENGAL TO REPLY IN CONNECTION WITH THE SAID LOAN WHETHER IT IS AN INTE REST FREE OR NOT. IF IT IS NOT INTEREST FREE LOAN, AND THE RATE OF INTEREST IS APPLIED ON T HE SAID LOAN SHOULD BE DECLARED BY THE WEST BENGAL GOVERNMENT THEN IN THAT CASE THE RA TE OF INTEREST DECLARED BY THE GOVERNMENT WILL BE TAKEN INTO ACCOUNT. THEREFORE, T HE LD. COUNSEL PRAYED THE BENCH TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESS ING OFFICER TO ADJUDICATE THE ISSUE AS PER THE INTEREST RATE WHICH IS TO BE DECLARED BY THE GOVT. OF WEST BENGAL. 3.5 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE H AS PRIMARILY REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 3.6 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT IN THE ASSESSEE`S C ASE UNDER CONSIDERATION, THE RATE OF INTEREST, ON THE LOAN, IS YET TO BE DECIDED BY T HE GOVERNMENT OF WEST BENGAL. WE NOTE THAT THE INTEREST EXPENDITURE CLAIMED ON ESTIM ATE BASIS IS NOT AN ALLOWABLE EXPENDITURE UNDER THE PROVISIONS OF INCOME TAX ACT. IT IS THE CLAIM OF INTEREST ON ACCOUNT OF BEING UNASCERTAINED LIABILITY. WE ALSO N OTE THAT IN THE AUDIT CONDUCTED BY ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 7 C & AG, A COMMENT WAS MADE THAT INTEREST IN RESPECT OF THE UNSECURED LOAN FROM THE GOVERNMENT WAS SHORT PROVISION RESULTING IN UNDERST ATEMENT OF LOSS, AND THEREFORE BASED ON THIS COMMENT, IT WAS CONTENDED BY THE ASSE SSEE THAT THE INTEREST PROVIDED BY THE ASSESSEE WAS RATHER ON LOWER SIDE AND SHOULD BE ALLOWED. WE DO NOT AGREE WITH THIS CONTENTION OF THE ASSESSEE BECAUSE THERE IS NO ANY COGENT EVIDENCE AVAILABLE ON RECORD FROM THE LENDER (GOVT. OF WEST BENGAL) BY THE WEST BENGAL GOVERNMENT THEN IN THAT CASE THE RATE OF INTEREST D ECLARED BY THE GOVERNMENT WILL BE TAKEN INTO ACCOUNT. THEREFORE, THE LD. COUNSEL PRAY ED THE BENCH TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDI CATE THE ISSUE AS PER THE INTEREST RATE WHICH IS TO BE DECLARED BY THE GOVT. OF WEST B ENGAL. 3.5 ON THE DR FOR THE REVENUE HAS PRIMARILY REITER ATED THE SAD TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 3.6 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT IN THE ASSESSEES C ASE UNDER CONSIDERATION, THE RATE OF INTEREST, ON THE LOAN, IS YET TO BE DECIDED BY T HE GOVERNMENT OF WEST BENGAL. WE NOTE THAT THE INTEREST EXPENDITURE CLAIMED ON ESTIM ATE BASIS IS NOT AN ALLOWABLE EXPENDITURE UNDER THE PROVISION OF INCOME TAX ACT. IT IS THE CLAIM OF INTEREST ON ACCOUNT OF BEING UNASCERTAINED LIABILITY. WE ALSO N OTE THAT IN THE AUDIT CONDUCTED BY C&AG, A COMMENT WAS MADE THAT INTEREST IN RESPECT O F THE UNSECURED LOAN FROM THE GOVERNMENT WAS SHORT PROVISION RESULTING IN UNDERST ATEMENT OF LOSS, AND THEREFORE BASED ON THIS COMMENT, IT WAS CONTENDED BY THE ASSE SSEE THAT THE INTEREST PROVIDE BY THE ASSESSEE WAS RATHER ON LOWER SIDE AND SHOULD BE ALLOWED. WE DO NOT AGREE WITH THIS CONTENTION OF THE ASSESSEE BECAUSE THERE IS NO ANY COGENT EVIDENCE AVAILABLE ON RECORD FROM THE LENDER (GOVT. OF WEST BENGAL) OF THE SAID LOAN ABOUT INTEREST TO BE CHARGED. HOWEVER, THE COUNSEL FOR THE ASSESSEE HAS PRAYED TH E BENCH THAT ASSESSEE COMPANY WILL GET THE SANCTION LETTER/CONFIRMATION F ROM THE GOVERNMENT OF WEST BENGAL ABOUT THE RATE OF INTEREST TO BE CHARGED, OR NOT TO BE CHARGED, ON SUCH LOAN. THEREFORE, THE COUNSEL PRAYED THE BENCH THAT THE AS SESSEE HAS ALREADY APPLIED TO THE GOVT. OF WEST BENGAL, FOR CONFIRMATION LETTER A ND WILL GET IT VERY SOON. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO TAKE INTO ACCOUN T THE SANCTION LETTER/CONFIRMATION LETTER OF THE GOVERNMENT OF WEST BENGAL IN RESPECT OF THE RATE OF INTEREST WHICH IS TO BE CHARGED ON SUCH LOAN AND ADJUDICATE THE ISSUE AS PER THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, WE ALLOW THIS APPEAL FOR STATISTICAL PURPOSES. 3.7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE , IS ALLOWED FOR STATISTICAL PURPOSES. 5. LEARNED REPRESENTATIVES ARE UNANIMOUS DURING TH E COURSE OF HEARING THAT WE NEED TO ISSUE SIMILAR REMAND DIRECTION IN T HE IMPUGNED ASSESSMENT YEAR AS WELL. NO DISTINCTION ON FACTS OR LAW EMERGE FROM THE CASE FILE IN THESE TWO ASSESSMENT YEARS REGARDING THE IMPUGNED ISSUE. WE THEREFORE ADOPT JUDICIAL CONSISTENCY IN THESE FACTS AND CIRCUMSTANC ES TO RESTORE ASSESSEES LATTER SUBSTANTIVE GROUND BACK TO THE ASSESSING OFF ICER IN THE SAME TERMS. NO ITA NO.1850/KOL/2016 A.Y 2008-09 THE CALCUTTA TRAMWAYS CO. LTD. VS. DCIT, CIR -4(2),KOL. PAGE 8 OTHER ARGUMENT HAS BEEN RAISED BEFORE US DURING THE COURSE OF HEARING ON FORMER LEGAL ISSUE. 6. THIS ASSESSEES APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 30/ 11/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 30 / 11 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-THE CALCUTTA TRAMWAYS CO. LTD. 12 R.N. M UKHERJEE RD.KOLKATA-001 2. /RESPONDENT-DCIT, CIR-4(2), AYKAR BHAVAN,4 TH FLOOR, P-7, CHOWRINGHEE SQ. KOL-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 3,