Case Law Details
CIT Vs Tamil Nadu Water Investment Co. Ltd. (Madras High Court)
The main contention of the learned counsel for the appellant / Revenue is that the Tamil Nadu Government may not be a Public Financial Institution but M/s. Infrastructure Leasing and Financial Services limited is a Public Financial Institution and therefore, the interest payment not paid by the assessee company to the promoters is hit by explanation 3C to Section 43B (d) of Income Tax Act. Whereas, the authorities below did not consider this aspect and they erroneously concluded that the promoters were not covered by the definition of Public Financial Institution as per Explanation 4 to Section 43B read with section 4A of the companies Act, 1956. In support of his contention, the learned counsel placed reliance on the decision of the Hon’ble Supreme Court in CIT v. Gujarat Cypromet Ltd [(2019) 103 taxmann. Com 346 (SC)].
It is not in dispute that the interest payable to the Government of Tamil Nadu is not hit by the provisions of section 43B of the Act. However, in the present case, the assessee was provided with loan not only by the Government of Tamil Nadu, but also by M/s. Infrastructure Leasing and Financial Services Limited, and the interest liability, which accrued during the relevant assessment years, was not actually paid by the assessee, was sought to be deducted. In such circumstances, it has to be examined as to whether IL&FS is a public interest institution. Without verifying the same, the Tribunal simply held that the promoters were not covered under the definition of Public Financial Institution as per Explanation 4 to section 43B r/w section 4A of the Companies Act and hence, the provisions of section 43B(d) r/w Explanation 3C would not be applicable to the case of the assessee.
At this juncture, the learned counsel for the appellant invited the attention of this court to a decision of the co-ordinate bench in TCA. No.63 of 2015, dated 14.12.2020 [CIT v. Tamil Nadu Small Industries Corporation Ltd]. In that case, the Tribunal remanded the matter to the assessing officer to examine as to whether the assessee paid the interest to the Government of Tamil Nadu or to any other financial institution, after having held that interest paid to Government of Tamil Nadu is not hit by the provisions of section 43B of the Act.
In view of the reasoning stated in the preceding paragraphs, the orders of the Tribunal are set aside and the matters are remanded to the Assessing Officer to examine, whether M/s. Infrastructure Leasing and Financial Services Limited (IL&FS) is a public financial institution; and if it is in affirmative, then, section 43B(d) r/w explanation 3C will be applicable; and pass orders afresh, after providing due opportunity of hearing to all the parties, within a period of eight weeks from the date of receipt of a copy of this judgment.
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