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TMI Blog1995 (6) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... . Net loss as per profit and loss account 1,44,97,339 Add : (1) Depreciation debited in Rs. accounts. 27,50,752 As per audit report (a) The expenditure in excess - 6D 7,710 (b) Entertainment expenditure (Rs.11,559-Rs.5,000 under section 37(2A) 6,559 (c) Articles presented in excess - Rule 6B 12,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- Consequent to the adjustments made, an additional tax of Rs. 6,95,755 was levied under section 143(1)(a) of the Income-tax Act. On receipt of the intimation, the appellant filed a petition under section 154 seeking rectification of the adjustments made in the intimation sent to it and requesting for waiver of additional tax. The petition was rejected by the Dy. CIT (Assessment), Special Range, Trichur in his order dated 6-3-1992. The appellant's contention that the adjustments as have been made in the intimation particularly in relation to the interest debited in the profit and loss account in respect of the loans taken from Industrial Finance Corporation of India and Industrial Development Bank of India Ltd., cannot form part of prima facie adjustments, did not find favour with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the interest has become payable to the public financial institutions in accordance with the terms and conditions of the agreement governing the loan or borrowing. From the statements which accompanied the return it could not be said that there was any material to say that the interest had become payable by the assessee on the loans from IFCI and IDBI. Therefore, the disallowance of interest in terms of clause (d) of section 43B cannot be viewed as a prima facie adjustment. He also relied on the Board's Circular No. 689, dated 24th August, 1994 in support of the contention that only in the circumstances specified in the Circular prima facie adjustments can be countenanced and not in any other case. 4. Sri Kesavan further submitted that the disallowance was made under section 43B(a) on the basis of the information contained in Form No. 3 CD being the form prescribed for tax audit report. Column 7 of the said form is relevant for the purpose of the issue before the Tribunal. Column 7 does not unequivocally refer to the kind of disallowance that could be made under clause (a) of section 43B. In this connection he submitted that the Explanation 2 added to section 43B retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information contained in the tax audit report, the Assessing Officer had rightly made the disallowance of interest on the loans taken from IDBI and IFCI. According to him, column 7 in Form No. 3 CD had reference to " other sums " in addition to tax or duty and, therefore, the payment of interest on the loans from the public financial institutions would fall within the meaning of " other sums " occurring in column 7. The tax auditor also in the annexure to the tax audit report had stated that the impugned amount had not been paid during the year. The appellant also does not question the remarks of the tax auditor. In the circumstances, the Assessing Officer had rightly invoked clause (d) of section 43B. Even under section 143(1)(a) of the Income-tax Act, total income has to be determined in accordance with the provisions applicable to the computation of total income. Therefore, the disallowance made under section 43B would certainly form part of the prima facie adjustments. 6. Thus we have heard rival submissions and perused the records placed before us. The return in this case was accompanied by provisional profit and loss account, provisional balance-sheet and tax audit report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act in respect of-- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) (c) (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution, or a State Financial Corporation or a State Industrial Investment Corporation in accordance with the terms and conditions of the agreement governing such loan or borrowing ; shall be allowed irrespective of the previous year in which the-liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (a) which is actually paid by the assessee on or before the due date applicable in his case or furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t governing such loan or borrowing. Therefore, unless there was information about the agreement governing such loan or borrowing, and unless from such information it is gathered that the sum has become payable during the accounting year, clause (a) of section 43B cannot be invoked off-hand. The appellant has not furnished, along with the return, the agreement governing the loan from the public financial institutions, nor the tax auditor in his report in form No. 3CD had remarked or indicated that the amount had become payable during the year, but not paid. The remark is only to the effect that the impugned sums have been debited to the profit and loss account, but not paid during the year. We have already indicated that the debit has to be made on account of the accrual of liability as the corporation was maintaining its accounts on mercantile basis. We have also indicated that a mere debit in the profit and loss account on the basis of accrual of liability is not sufficient evidence to show that the amount has become presently payable during the previous year relevant to the assessment year. That would depend upon the terms and conditions of the agreement. Without any material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such purpose has not been brought out in column 7 of the prescribed form, as according to him, other sums coming along with the train of words such as ' tax, duty ' occurring in column 7 of the prescribed form should naturally refer to ' other sums ' found in clause (a) of section 43B, such as, fees or cess by whatever name called. The inclusion of the words ' cess or fee ' was effected by the Finance Act, 1988 with effect from 1-4-1989. Prior to that, clause (a) contained only reference to tax or duty. With the inclusion of the words ' cess or fee ' with effect from 1-4-1989, the expression ' other sum ' found in column 7 of the prescribed form should mean to include only the words ' cess ' or ' fee '. Thus, column 7 of the prescribed form is deficient or defective in not bringing in to the fore sums mentioned in clauses (b), (c), and (d) of section 43B. We uphold his contention for the reasons stated by him. So far as clause (i) of column 7 is concerned, it is for the authorities to redraft column 7 of the prescribed form in order to avoid ambiguities in the information obtained from tax audit in respect of items covered in clause (a) to clause (d) of section 43B. We further hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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