2017 (9) TMI 1758 - AT - Income Tax

Addition of interest accrued on loan to U.P. Cooperative Sugar Factories Federation Ltd. - Held that - The details are at pager book. The total interest expenses taken from U.P. Government is ₹ 6,65,15,444/- and deposited with U.P. Cooperative Sugar Factories Federation Ltd. and the interest accrued is ₹ 85,50,000/-. Therefore, the net interest expenses after netting off is appearing at page No. 40 under Schedule- T, under interest expenses, U.P. Government at ₹ 5,79,65,444/-. Therefore, the assessee has correctly accounted for it into his books of account and the ld. CIT(A) has rightly deleted to the addition of ₹ 85,50,000/-. Addition of Modvat & Canvat receivable - Held that - It is in the nature of current assets and appearing in the balance sheet. The modvat and Canvat receivable which is paid in advance by the appellant on various items by debiting the receivable account and is shown as an asset item and the same is adjusted against the excise duty to be paid subsequently. The ld. CIT(A) has rightly deleted the addition made by the Assessing Officer on account of Modvat & Canvat receivable. Therefore, this ground of appeal is dismissed. Application of section 43B(d) on interest paid/payable which has not been paid upto the date of filing the return - Held that - As decided in assessee s own case 2016 (5) TMI 363 - ITAT DELHI Shakkar Vishesh Nidhi, State Govt. Loan and UP Cooperative Sugar Factories Federation Ltd. do not fall under the definition of financial institution so as to attract the provisions contained u/s 43B(d) by any stretch of imagination. So finding no illegality or infirmity in the findings returned as determined against the revenue.

Summary

Issues Involved:
1. Addition of accrued interest income under 'Income from other sources'.
2. Treatment of Modvat and Canvat receivable as taxable income.
3. Disallowance of interest under section 43B(d) of the IT Act.

Analysis:
1. The first issue pertains to the addition of accrued interest income of ?85,50,000 under 'Income from other sources'. The Assessing Officer (AO) added this amount to the income of the assessee, but the assessee contended that it was accounted for in the ledger and offered as income. The Tribunal found that the interest expenses were correctly accounted for, and the Commissioner rightly deleted the addition. The Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

2. The second issue revolves around the treatment of Modvat and Canvat receivable as taxable income. The AO added ?10,62,647 to the income, considering it as receivable claim. However, the Tribunal noted that these were advance excise deposits, appearing in the balance sheet as current assets. The Commissioner correctly deleted this addition, as it was not taxable income. The Tribunal dismissed this ground of appeal.

3. The final issue concerns the disallowance of interest under section 43B(d) of the IT Act. The AO disallowed ?7,47,49,740 of interest, as it was not paid by the due date of filing the return. The Tribunal referred to a previous decision where it was held that certain lenders did not fall under the definition of public financial institutions. As the interest was payable to government entities, section 43B(d) did not apply. Following this precedent, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner's decision.

In conclusion, the Tribunal upheld the Commissioner's decisions on all three issues, dismissing the Revenue's appeal in its entirety.