2012 (12) TMI 1225 - AT - Income Tax

Summary

Issues involved: Cross appeals by Revenue and assessee regarding interest on NCDC loan under sec.43B and set off of brought forward losses under sec.72 and sec.80P.

Issue 1 - Interest on NCDC loan under sec.43B:
The Revenue contended that interest on NCDC loan is hit by sec.43B as it was not paid before the due date. However, the Commissioner of Income-tax(Appeals) found that the loan was from the Government of Tamilnadu, not NCDC, and thus not covered by sec.43B. The Tribunal noted the loan was availed from the Government of Tamilnadu, not NCDC, as per Government approvals. The privity of contract was between the assessee and the Government of Tamilnadu, making any amount payable to the Government not hit by sec.43B. The Tribunal upheld the Commissioner's decision, ruling in favor of the assessee.

Issue 2 - Set off of brought forward losses under sec.72 and sec.80P:
The assessee argued that brought forward losses should be set off against business profits under sec.72, not against gross total income. The assessing authority's method of adding income from other sources to business income affected the claim of deduction under sec.80P. The Tribunal disagreed with the method followed, stating that sec.80P should be applied first to reduce income from other sources before considering set off of business losses against business profits. The Tribunal directed the Assessing Officer to recompute the assessment accordingly. As a result, the appeal filed by the assessee succeeded.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, emphasizing the correct application of sec.43B for interest on NCDC loan and sec.80P for set off of brought forward losses. The orders were pronounced on December 14, 2012, at Chennai.