Dindayal Magasvargiya Sahakari Soot Girni Ltd. Vs ACIT (ITAT Pune)
ITAT Pune held that provision of interest on loan from state government is ascertained liability and hence couldn’t be disallowed under section 37 of the Income Tax Act. Accordingly, the appeal is allowed.
Facts- The assessee is a cooperative spinning mill. AO completed the assessment u/s 143(3) r.w.s. 148 of the IT Act by determining total income at Rs.4,32,92,147/-. The above assessed income includes addition on account of disallowance of interest of Rs.2,42,00,000/- payable to Government of Maharashtra being unascertained liability u/s 37 of the IT Act & also includes disallowance on account of carried forward losses. CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Admittedly, when the state government grant loan to an entity some interest is charged and the loan is also payable under the terms and conditions of the agreement. We also find that since the assessee cooperative spinning mill has not obtained certain percentage of the loan amount out of the sanctioned loan amount the repayment could not be started however as per the mercantile system of accounting the interest is required to be provided in the books of accounts and the same cannot be termed as an unascertained liability which can be disallowed u/s 37 of the IT Act.
