DCIT Vs K.S. Diesels Ltd. (ITAT Mumbai)
we are of the considered view that as the assessee as per the terms and conditions of the OTS had during the year under consideration made a payment of interest of Rs.1,91,19,083/- to GIIC out of the interest of Rs.3,23,84,509/- (supra) that was disallowed u/s 43B in the said earlier years, therefore, such sum so actually paid would be eligible as a deduction during the year under consideration u/s 43B of the Act.
As regards the balance amount of interest of Rs. 1,32,65,426/-[Rs.3,23,84,509/- (-) Rs.1,91,19,083/-], we concur with the view taken by the CIT(A) that if the said amount was disallowed u/s 43B in the earlier years and had been credited by the assesee company in its Profit and loss account for the year under consideration on account of waiver of interest income payable to GIIC, then, the claim of the assessee for deduction of such amount in its computation of income is in order. We, thus, in terms of our aforesaid observations find no infirmity in the view taken by the CIT(A) who had directed the A.O to carry out certain verifications, viz. (i). that the interest waived was credited in the profit & loss a/c of the assessee company for the year under consideration; and (ii). that the interest waived had been included in the figure of ‘Profit’ as per the profit & loss a/c taken to the computation of income; and (iii). that such interest payable to GIIC was disallowed u/s 43B in the earlier years. Accordingly, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) we uphold his order in terms of our aforesaid observations.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-5, Mumbai, dated 20.11.2018, which in turn arises from the order passed by the A.O u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (for short „Act‟), dated 26.02.2016 for A.Y 2010-11. The revenue has assailed the impugned order on the following solitary ground before us:
“Whether on the fact and circumstance of the case law, Ld. CIT(A) is justified in allowing partly the assessee claim of Rs.3,23,84,509/- u/s 43B of the I.T. Act and given direction A.O for further verification without appreciating the fact that said disallowance was made by the A.O rightly and per law during the assessment proceedings.”
2. Briefly stated, the assessee company which is engaged in the business of manufacturing of fuel injection equipments and pump sets had filed its return of income for A.Y 2010-11 on 29.09.2010, declaring a loss of (-) Rs.1,46,11,516/-(including unabsorbed depreciation of Rs.7,29,864/-). The return of income filed by the assessee company was initially processed as such u/s 143(1) of the Act. Original assessment was framed by the A.O vide his order passed u/s 143(3), dated 08.02.2013 determining the total income of the assessee company at (-) Rs.1,44,83,023/-. Subsequently, the A.O holding a belief that the assessee‟s claim for deduction u/s 43B of interest payable to Gujarat Industrial Investment Corporation Ltd.(GIIC) of Rs.3,23,84,509/- was wrongly allowed while framing the assessment u/s 143(3), dated 08.02.2013, reopened the case of the assessee u/s 147 of the Act.
3. During the course of the reassessment proceedings, it was observed by the A.O that the assessee company had obtained a “term loan” from Gujarat Industrial Investment Corporation Ltd. (GIIC) way back in the year 1973 for acquisition of new plant and machinery. Thereafter, as the assessee company in succeeding years had suffered losses and had become a sick company, it thus failed to repay the aforesaid loan. Interest charged by GIIC on the aforesaid loan over the years was provided for by the assessee company as per the mercantile system of accounting in its „books of accounts‟. However, as the aforesaid amount of interest was not actually paid by the assessee, therefore, it is stated to have while computing its income for the said respective years disallowed the same as per the mandate of Sec. 43B of the Act, as under :
