Enkei Wheels India Ltd. Vs DCIT (ITAT Pune)
ITAT Pune held that interest paid on customs duty is allowable as deduction under section 43B of the Income Tax Act, 1961.
Facts- During the assessment proceedings AO observed that assessee had paid Rs.3,37,96,354/- on account payment of interest on custom duty on various dates. The assessee claimed said amount as deduction allowable under section 43B of the Act as being paid on or before due date of filing of return of income for the relevant assessment year. The AO disallowed the said amount stating that it is not allowable deduction under section 43B of the Act. CIT(A) upheld the disallowance.
Conclusion- In the case of Shankar Trading Co Pvt Ltd, the assessee company had paid interest on Sale tax. The AO had not allowed the said interest as deduction u/s 43B of the Act. However, the Hon’ble Delhi High Court held that it is an allowable deduction u/s 43B of the Act.
The facts of the Shankar trading Co P. Ltd and that of the assessee are identical. In the case of the assessee, the assessee has paid Interest on Customs Duty. In the case of the assessee the Interest on Customs Duty is automatic. Hence, the decision of Hon’ble Delhi High Court is applicable in the case of the assessee.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-1, Pune, dated 25.03.2019for the A.Y. 2013-14 emanating from the order of Assessing Officer (AO) passed under section 143(3) of the Act, 1961 dated 23/12/2016. The assessee has raised the following grounds of appeal:
“1. The learned CIT(A) erred in confirming the disallowance of interest of Rs.3,37,96,354/- paid on account of delayed payment of custom duty on the ground that the same was disallowable in view of explanation (1) to section37(1) of the Act.
2. The learned CIT(A) failed to appreciate that the interest on delayed payment of custom duty was not a payment which was in the nature of any offence or prohibited by law and therefore, the provisions of explanation (1) to section 37(1) were not applicable and accordingly, there was no reason to disallow the claim of the assessee company.
3. The learned CIT(A) further erred in holding that interest on delayed payment on custom duty was not covered by the provisions of section 43 B and hence, the disallowance made by the A.O. was justified.
4. The learned CIT(A) erred in not appreciating that interest on delayed payment on custom duty was covered by the provisions of section 43B and therefore, the assessee was justified in claiming the said amount as a deduction in the year under consideration.
5. Without prejudice to Ground Nos. 3 and 4, the assessee submits that in case, it is held that the provisions of 43B are not applicable to the interest paid on account of delay in payment of custom duty, in that event, the total interest debited in the books of Rs.7,85,20,569/- may kindly be allowed as a deduction while computing the income of the assessee company.”
2. Brief facts of the case : In this case during the assessment proceedings the Assessing Officer(AO) observed that assessee had paid Rs.3,37,96,354/- on account payment of interest on custom duty on various dates. The assessee claimed said amount as deduction allowable under section 43B of the Act as being paid on or before due date of filing of return of income for the relevant assessment year. The AO disallowed the said amount stating that it is not allowable deduction under section 43B of the Act. The ld.CIT(A) upheld the disallowance. The facts mentioned in para 6.6.3 of the ld.CIT(A)’s order are as under:
“I find that Enkei Castalloy Ltd., which was carrying on business of manufacturing auto parts and aluminum alloy wheels had imported raw materials under the Advance Licensing Scheme issued by the Director General of Foreign Trade (DGFT) and as per the terms and conditions of the said advance licenses, Enkei Castalloy Ltd. had to fulfill certain export obligation within the stipulated time i.e. within 24 months from the date of issue of license. The said license was later on extended to 36 months by the DGFT. Later on, by the order of Hon’ble High Court of Bombay, dated 26.02.2010, Enkei Castalloy Ltd. got demerged and two companies were formed namely: Alicon Castloy Ltd. (Demerged Company) and Enkei Wheels India Ltd. (the appellant company). After demerged, 4 Advance Authorization Licenses were transferred by the DGFT to the appellant company on 03.02.2012 and the details of which is as under:-
