M/s. The Baghpat Co- Operative Sugar MIlls Ltd., Meerut V. ACIT, Meerut

ITA 6453/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3780 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P S KASHYAP
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. O. P. KANT, ACCOUNTANT MEMBER ITA NO. 6453/DEL/2014 (ASSESSMENT YEAR-2010-11) ASSESSEE BY : SH. P.S. KASHYAP, CA RESPONDENT BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 31.10.2017 DATE OF PRONOUNCEMENT : 31.10.2017 O R D E R PER BHAVNESH SAINI, J.M : 1. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT (A), MEERUT, DATED 26.09.2014 FOR ASSESS MENT YEAR 2010- 11, CHALLENGING THE ADDITION OF RS. 7,78,62,487/- U /S 43B (D) OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CO- OPERATIVE SOCIETY AS DEFINED U/S 2(19) OF THE INCOM E TAX ACT. THE ASSESSEE SOCIETY IS CARRYING ON BUSING OF MANUFACTU RING AND SALE OF SUGAR AND ITS BY PRODUCTS. THE ISSUE IN APPEAL RELA TES TO DISALLOWANCE MADE U/S 43B(D) OF THE INCOME TAX ACT FOR INTEREST ACCRUED AND DUE BUT NOT PAID. THE BAGHPAT CO - OPERATIVE SUGAR MILLS LTD. C/O KASHYAP & CO., CA 214, CITI CENTER, BEGUM BRIDGE ROAD, MEERUT . VS A CIT CIRCLE-2 MEERUT GIR/PAN: AAAAT0568P (APPELLANT) (RESPONDENT) 2 ITA NO. 6453/DEL/2014 3. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO OBSERVED THAT THE APPELLANT HAS NOT PAID AN INTEREST OF RS. 7,78,62,487/- ON ACCOUNT OF UNSECURED LOANS WHICH HAVE BECOME ACCRUE D AND DUE. THE AO THEREAFTER INVOKED THE PROVISION OF SECTION 43B(D) AND AFTER REJECTING APPELLANTS SUBMISSION MADE AN ADDITION O F RS. 7,78,62,487/- TO THE TOTAL INCOME OF THE APPELLANT. THE AR ARGUED THAT SUCH INTEREST PERTAINS TO VARIOUS INSTITUTIONS OF THE UP GOVERNMENT AND DOES NOT FALL WITHIN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTIONS UNDER THE PROVISIONS OF SECT ION 43B(D) OF THE ACT. IT WAS ALSO ARGUED THAT THE DEFINITION OF PUBL IC FINANCIAL INSTITUTIONS AS DEFINED IN SECTION 4 A OF THE COMPA NIES ACT 1956 READ WITH SECTION 43B(D) OF INCOME TAX ACT 1961 IS EXHAUSTIVE DEFINITION AND CLEARLY DEFINES ALL THE FINANCIAL IN STITUTIONS. SECTION 4A(2) OF THE COMPANIES ACT, 1956 CLEARLY DEFINES TH E NOTIFIED INSTITUTIONS. THE VARIOUS INSTITUTIONS OF UP GOVERN MENT ARE NOT MENTIONED IN SECTION 4A(2) OF THE COMPANIES ACT, 19 56. IT WAS ALSO STATED THAT IN TAX AUDIT REPORT IN FORM 3CD THE AUD ITOR HAS ALSO NOT MENTIONED THAT THE INTEREST ACCRUED AND DUE BUT NOT PAID ON SHAKKAR VISHESH NIDHI, STATE GOVT. LOAN AND UP COOP ERATIVE SUGAR FACTORIES FEDERATION LTD. LOAN IS COVERED UND ER SECTION 43B(D) OF THE ACT. THE AR HAS CLAIMED THAT THE AO H AS COMPLETELY FAILED TO UNDERSTAND THE PROVISIONS OF SECTION 43B( D) OF THE ACT THEREFORE IN VIEW OF FACTS AND LEGAL POSITION THE A DDITION OF RS. 7,78,62,487/- DESERVES TO BE DELETED IN FULL. THE S AME ARGUMENTS WERE PUT FORWARD BEFORE THE AO ALSO. HOWEVER THE AO HAS REMARKED THAT THE EXPLANATION GIVEN WAS NOT FOUND T O BE CONVINCING. HE HAS THEREAFTER DWELLED ON THE INTENT ION OF LEGISLATURE AND HAS GIVEN AN OMNIBUS INTERPRETATION OF THE 3 ITA NO. 6453/DEL/2014 PROVISION AS HAVING BEEN ENACTED TO COVER ALL FINAN CIAL INSTITUTIONS CONTROLLED BY THE GOVERNMENT. 4. LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE CONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF ASSESSEE. HIS FINDINGS IN PARA 3.2 AND 3.3 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 3.2 I HAVE GONE THROUGH THE WRITTEN SUBMISSION OF THE AR AS WELL AS THE ASSESSMENT ORDER. IT IS SEEN THAT IN THE ASSESSMENT ORDER THE AO HAS DISPOSED THIS ISSUE BY WRITING ONLY A FEW LINES AND BY VENTURING INTO THE REALM OF INTENTION OF THE LEGISLATION. HOWEVER THE AR OF THE APPELLANT HAS ALSO TAKEN AN ALTOGETHER MISLEADING L INE OF ARGUMENT IN THE SENSE THAT HE HAS HARPED ON THE MEA NING OF PUBLIC FINANCIAL INSTITUTION WHEREAS IN SECTION 43B(D) APART FROM PUBLIC FINANCIAL INSTITUTION INTEREST PA ID TO A STATE FINANCIAL CORPORATION OR TO A STATE INDUSTRIA L INVESTMENT CORPORATION IS ALSO COVERED. THUS WHAT I S RELEVANT HERE IS NOT WHAT ACCORDING TO SECTION 4A O F THE COMPANIES ACT, 1956 CAN BE A PUBLIC FINANCIAL INSTI TUTION BUT WHETHER THE INTEREST PAID BY THE ASSESSEE TO TH E INSTITUTIONS OF UP GOVERNMENT WILL FALL UNDER THE P ROVISION OF SECTION 43B(D). NEITHER THE AO NOR THE AR HAVE G IVEN ANY COMMENTS ON THIS POINT. THE AR OF THE APPELLANT HAS CLAIMED THAT THE AO HAS MISUNDERSTOOD THE PROVISION OF SECTION 43B(D). IT SEEMS THAT HE HAS DONE NO BETTER . HE HAS REPEATEDLY MADE THIS ARGUMENT THAT THE INTEREST ACC RUED AND DUE BUT NOT PAID TILL THE DATE OF RETURN FILING CAN ONLY BE ADDED TO INCOME IN RESPECT OF LOAN TAKEN FROM PU BLIC FINANCIAL INSTITUTION. IT SEEMS HE HAS CONVENIENTLY FORGOTTEN THAT IN SECTION 43B(D) PUBLIC FINANCIAL INSTITUTION AND STATE FINANCIAL CORPORATION AND STATE INDUSTRIAL INVESTME NT CORPORATION STAND ON EQUAL FOOTING. SO THE MOOT QUE STION HERE IS NOT WHETHER SHAKKAR VISHESH NIDHI AND, UP COOPERATIVE SUGAR FACTORIES FEDERATION ARE PUBLIC F INANCIAL INSTITUTIONS RATHER THE QUESTION TO BE ANSWERED HER E SHOULD HAVE BEEN WHETHER THE INSTITUTIONS FROM WHICH THE APPELLANT HAD TAKEN LOAN AND TO WHICH IT HAS PAID I NTEREST FALL WITHIN THE DEFINITION OF STATE FINANCIAL CORPO RATION OR STATE INDUSTRIAL INVESTMENT CORPORATION. THE APPELL ANT HAD ALSO MADE A REFERENCE TO THE ORDER OF CIT(A), NOIDA IN ASSESSEES OWN CASE AND THE ORDER OF CIT(A), MEERUT IN THE 4 ITA NO. 6453/DEL/2014 SIMILAR CASE OF RAMALA SAHKARI CHINNI MILLS LTD. HO WEVER IN BOTH THESE ORDERS THE ID. CIT(A) HAVE GIVEN THEI R DECISION IN THE CONTEXT OF THE DEFINITION OF PUBLIC FINANCIA L INSTITUTIONS. AS STATED EARLIER SECTION 43B(D) DOES NOT ONLY SPEAK OF A PUBLIC FINANCIAL INSTITUTION. THE AR OF THE APPELLANT HAS NOT SHOWN THAT THE INSTITUTIONS FROM WHICH THE APPELLANT HAS TAKEN LOAN HAVE NOT BEEN ESTABLIS HED UNDER SECTION 3 OR SECTION 3 A OF THE STATE FINANCI AL CORPORATIONS ACT 1951 OR HAS NOT BEEN NOTIFIED UNDE R SECTION 46 OF THE STATE FINANCIAL CORPORATIONS ACT 1951. 3.3 THUS, IT IS NOT ESTABLISHED THAT THE APPELLANT HAS NOT PAID INTEREST ON A LOAN TAKEN FROM A STATE FINA NCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPOR ATION AND ANY PAYMENT OF INTEREST TO SUCH LENDERS IS NOT HIT BY THE PROVISION OF SECTION 43B(D) OF THE IT ACT, 1961 . BASED ON ABOVE DISCUSSION, I HAVE COME TO A CONCLUSION TH AT THE AO HAS RIGHTLY MADE THIS ADDITION. THIS GROUND OF A PPEAL IS THEREFORE DISMISSED AN ADDITION OF RS. 7,78,62,4 87/- IS CONFIRMED. 5. LD. COUNSEL FOR ASSESSEE AT THE OUTSET SUBMITTED T HAT IN PRECEDING ASSESSMENT YEAR, LD. CIT(A) HAS DELETED T HE SIMILAR ADDITION AND DEPARTMENT FILED APPEALS BEFORE ITAT, DELHI BENCH. ALL THE DEPARTMENTAL APPEALS HAVE BEEN DISMISSED ON IDE NTICAL FACTS. HE HAS SUBMITTED THAT ISSUE IS THEREFORE, COVERED I N FAVOUR OF THE ASSESSEE. HE HAS FILED COPIES OF THE FOLLOWING ORDE RS OF THE TRIBUNAL IN THE CASE OF SAME ASSESSEE. 1. ORDER OF ITAT, DELHI BENCH IN THE CASE OF ACIT V S THE BAGHPAT CO-OPERATIVE SUGAR MILLS PVT. LTD., IN ITA NO. 6157/DEL/2012, ASSESSMENT YEAR 2007-08, DATED 07.08.2015. 2. ORDER OF ITAT, DELHI BENCH IN THE CASE OF ACIT VS THE BAGHPAT CO-OPERATIVE SUGAR MILLS PVT. LTD., IN ITA NO. 6058/DEL/2013, ASSESSMENT YEAR 2008-09, DATED 05.04.2016. 3. ORDER OF ITAT, DELHI BENCH IN THE CASE OF ACIT V S THE BAGHPAT CO-OPERATIVE SUGAR MILLS PVT. LTD., IN ITA NO. 1535/DEL/2014, ASSESSMENT YEAR 2009-10, DATED 30.03.2016. 4. ORDER OF ITAT, DELHI BENCH IN THE CASE OF ACIT V S THE BAGHPAT CO-OPERATIVE SUGAR MILLS PVT. LTD., IN ITA NO. 5 ITA NO. 6453/DEL/2014 6855/DEL/2015, ASSESSMENT YEAR 2011-12, DATED 20.09.2017. COPIES OF ALL THE ABOVE ORDERS HAVE BEEN SUPPLIED TO LD. DR AND AFTER GOING THROUGH THE SAME, HE HAS STATED THA T THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ABOVE ORDERS O F THE TRIBUNAL IN THE CASE OF SAME ASSESSEE. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE IN THE LI GHT OF THE SUBMISSIONS OF THE PARTIES. IT IS ADMITTED FACT TH AT IN THE PRECEDING YEAR MENTIONED ABOVE, ON IDENTICAL FACTS, LD. CIT(A ) DELETED THE SIMILAR ADDITION ON WHICH DEPARTMENT FILED THE APPE ALS BEFORE THE TRIBUNAL AND ALL THE DEPARTMENTAL APPEALS HAVE BEEN DISMISSED. IN ASSESSMENT YEAR 2007-08, THE TRIBUNAL IN ITA NO . 6157/DEL/2012( SUPRA) DISMISSED THE DEPARTMENTAL APPEAL BY UPHOLDING THAT SECTION 43B(D) OF THE INCOME TAX ACT DOES NOT APPLY TO THE FACTS OF THE CASE. THE FINDINGS OF THE TRIBU NAL IN PARA 6-7 OF THE ORDER ARE REPRODUCED AS UNDER: 6. THE SECOND ISSUE IS DISALLOWANCE OF INTEREST PA ID TO FEDERATION. THE AO DISALLOWED THE AMOUNT ON THE GROUND THAT THE PAYMENT OF INTEREST IS OUTSIDE THE PURVIEW OF BUSINESS OF THE ASSESSEE. LD. CIT(A) GAVE A FIND ING THAT THE ASSESSEE HAS TAKEN LOAN FROM GOVT. OF INDIA AND UP GOVERNMENT, FOR THE PURPOSE OF BUSINESS, AND THAT T HIS IS EVIDENT FROM THE SANCTIONED LETTERS AND HENCE THE I NTEREST IN QUESTION IS ALLOWABLE U/S 36(1). WE HAVE SEEN RE ASON TO INTERFERE IN THIS FINDING OF THE FIRST APPELLATE AUTHORITY. THE REVENUE HAS RAISED A LEGAL ARGUMENT THAT, THE I NTEREST IN QUESTION CANNOT BE ALLOWED, AS IT IS HIT BY THE PROVISIONS OF SECTION 43B(D) OF THE ACT. 7. SECTION 43B(D) OF THE ACT READS AS FOLLOWS:- 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 CORPORATION), IN ACCORDANCE W ITH THE TERM AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING 6 ITA NO. 6453/DEL/2014 AS THE INTEREST IN QUESTION IS PAYABLE TO GOVT. OF INDIA AND THE STATEMENT OF UP GOVERNMENT, SECTION 43(B)(D) DO ES NOT APPLY. HENCE, WE DISMISS THIS GROUND. 7. IN SUBSEQUENT ASSESSMENT YEARS 2008-09, 2009-10, 2 011-12, THE TRIBUNAL CONSIDERING THE IDENTICAL FACT AS INVO LVED IN THE PRESENT APPEAL, CONFIRMED THE ORDER OF THE LD. CIT( A) IN DELETING THE ADDITION. DEPARTMENTAL APPEALS WERE DISMISSED. 8. LD. DR ALSO SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ALL THE ABOVE ORDERS OF THE TRIBUNA L IN THE CASE OF THE SAME ASSESSEE. 9. BY FOLLOWING THE ABOVE ORDERS OF THE TRIBUNAL IN T HE CASE OF THE SAME ASSESSEE ON IDENTICAL FACTS, WE SET ASIDE THE ORDERS OF THE AUTHORITY BELOW AND DELETE THE ADDITION. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O. P.KANT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 31.10.2017 @M!T