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2018 (5) TMI 1001 - AT - Income TaxDisallowance of interest cost - whether interest on loans taken on the basis of keyman insurance policies would not fall u/s.43B of the Act - Held that - There is no dispute that interest to the extent of ₹ 70,35,356/- on loans borrowed from LIC, a public financial institution, stood payable as at the end of relevant previous year. Section 43B of the Act, mandates that interest payments could be allowed only in the year in which it is actually paid. Assessee having not paid interest during the relevant previous year, lower authorities were justified in applying Section 43B of the Act and making a disallowance. - Decided against assessee Recomputation of book profit u/s.115JB by restricting the claim of depreciation on windmills to 5.28% as against 80% reckoned by the assessee - Held that - Unless an assessee can show that depreciation was provided, by spreading 95% of the original cost, on the specified period, a claim in excess of what is set out in Schedule XIV of the Companies Act, 1956 cannot be allowed. We are therefore of the opinion that lower authorities were justified in recalculating the profit for the purpose of applying Section 115JB of the Act. We do not find any reason to interfere with the orders of the lower authorities. - Decided against assessee
Issues involved:
1. Disallowance of interest cost under Section 43B of the Income Tax Act, 1961. 2. Recomputation of book profit under Section 115JB of the Act based on depreciation on windmills. Issue 1: Disallowance of interest cost under Section 43B of the Income Tax Act, 1961: The appellant contested the disallowance of interest cost amounting to D70,75,350 under Section 43B of the Income Tax Act, 1961. The Assessing Officer disallowed the claim as the appellant failed to produce evidence of remitting the interest on loans secured by keyman insurance policies. The appellant's argument that interest on such loans should not fall under Section 43B was rejected by the lower authorities. The Tribunal upheld the disallowance, citing that interest payments are only allowed in the year of actual payment as per Section 43B, which the appellant failed to comply with. Issue 2: Recomputation of book profit under Section 115JB of the Act based on depreciation on windmills: The appellant challenged the recomputation of book profit under Section 115JB of the Act concerning the depreciation on windmills. The appellant claimed depreciation at 80% on windmills, higher than the prescribed 5.28% under Schedule XIV of the Companies Act, 1956. The appellant argued that the higher depreciation rate was justified due to the windmills' performance not meeting expectations. However, the Tribunal held that the appellant failed to demonstrate the basis for charging higher depreciation, as required by Section 205 of the Companies Act, 1956. Despite citing a circular and financial statements, the appellant could not prove the necessity for excess depreciation, leading to the dismissal of the appeal. In conclusion, the Tribunal dismissed the appeal of the assessee concerning both issues. The disallowance of interest cost under Section 43B and the recomputation of book profit based on depreciation on windmills were upheld, as the appellant could not provide sufficient evidence or justification for their claims. The judgment was pronounced on May 3, 2018, in Chennai.
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