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TMI Blog2016 (4) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... aking this addition and to that extent agree that it amounts to breach of principles of natural justice. In view of above discussions, we find that there was no no justification for adhoc disallowance of ₹ 25 lacs under the head “Manufacturing Material and Chemical Expenses”, hence, the same was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee Disallowance of accrued interest not paid in respect of secured / unsecured loans taken from various institutions of UP Government - CIT(A) allowed the claim - Held that:- CIT(A) has rightly held that the UP State Government itself and also its institutions namely UP Sahakari Chini Mill Sangh Limited and Sakkar Vikash Nikdhi are not covered by the definition of Public Financial Institutions / State Finance Institutions/ State Industrial Finance Institutions as defined u/s. 4A(2) of the Companies Act, 1956 and therefore provisions of section 43B(d) of the I.T. Act are not attracted in this case. Accordingly, disallowance made on this account was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee - ITA No. 6058/Del/2013 - - - Dated:- 5-4-2016 - Shri H. S. Sidhu, Judicial Member And Shri O. P. Kant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. We have heard both the parties and perused the records, especially the Order of the revenue authorities. 7.1 Apropos Ground No. 1 relating to deletion of addition of ₹ 25 lacs made by the AO on account of disallowance of manufacturing expenses under the head Manufacturing, material and chemicals . During the course of assessment proceedings A.O. found that the assessee society has claimed ₹ 1,01,78,326/- - under the head Manufacturing Material and Chemicals whereas in the immediately preceding year i.e. F.Y. 2006-07 expenses under the above head were claimed/shown ₹ 50,27,813/- thus the expense claimed under the above head were more than double the expenses of the last year. According to A.O. the AR of the assessee failed to explain the reasons for such a huge increase of expenses under the said head, and for want of proper explanation the A.O. made ad-hoc disallowance of ₹ 25 Lacs or estimate basis out of total claim under the said head. As against the above addition the assessee has furnished the details of Manufacturing Material and Chemicals expenses as per Schedule-'N' of profit and loss accounts which is reproduced as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Material and Chemical Expenses as per Schedule-N of Profit and Loss Accounts for the F.Y. 2006-07 along with quantitative details of cane crushed sugar produced, and consumption of Sulphur. We find that Ld. CIT(A) have gone through the details as given by the assessee in this regard and find that during the financial year under consideration the quantum of cane crushed and sugar produced have gone up substantially and as a result of which quantity of consumption of Sulphur has also gone up. This is besides the factor of Price rise in Sulphur which has caused further increase in the quantum of expenditure shown under the head Sulphur Consumed substantially. The details shows that as a result of increase in cane crushed and sugar produced the other items of expenditure under the head Manufacturing Material and Chemical Expenses have also registered increase of expenses in comparison to the last year s figure of expenses. In this regard, besides above explanation for increase in Manufacturing Material and Chemical Expenses the AR of the assessee has vehemently argued that the assessee maintains regular books of accounts and appropriate stock register which are duly audited by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard the AO observed that the above loans have been taken from Public Financial Institutions and State Financial Corporation. According to AO interest accrued on these loans should have been paid before the due date for filing of return u/s. 43B(d) of the I.T. Act. Since the proof of payment of above interest accrued was not furnished by the assessee, the AO disallowed the same and added to the income of the assessee u/s. 43B(d) of the Act. In this regard vide Remand Report dated 23/2/2013 the AO has reiterated the stand taken by him in the assessment order and pleaded for disallowance of the same. During the appellate proceedings the counsel of the assessee has pointed out some figure related to mistake committed by AO while working out quantum of interest accrued but not paid during the year under consideration. With the help of Annexures to the Balance Sheet of the assessee filed during the appellate proceedings it was pointed out that instead of ₹ 6,30,57,609/- (figure of interest accrued but not paid as adopted by the AO for disallowance i.e. interest against secured loan of ₹ 96,10,292 + Interest against unsecured loan of ₹ 5,34,47,317/-) the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Corporation/State Industrial Investment Corporation which has been prescribed u/s. 4A(2) of the Companies Act and on careful perusal of the same shows that the names of U.P. State Government, U,P. Sahakari Chini Mill Sangh Limited and Sakkar Vikash Nidhi are nowhere mentioned in the list of such investment institutions. Further, the assessee also contended that in the tax audit report u/s.44AB even the auditor has not mentioned in clause 21 that the interest accrued and due but not paid on above loans are covered by section 43B(d) of the Income Tax Act. We find that Ld. CIT(A) has rightly held that the UP State Government itself and also its institutions namely UP Sahakari Chini Mill Sangh Limited and Sakkar Vikash Nikdhi are not covered by the definition of Public Financial Institutions / State Finance Institutions/ State Industrial Finance Institutions as defined u/s. 4A(2) of the Companies Act, 1956 and therefore provisions of section 43B(d) of the I.T. Act are not attracted in this case. Accordingly, disallowance made on this account was rightly deleted by the Ld. CIT(A). We also find force in the assessee s counsel contention that the issue in dispute is squarely covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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