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TMI Blog2017 (11) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... firmation from the Government of West Bengal about the rate of interest to be charged, or not to be charged, on such loan. Therefore, the Counsel prayed the Bench that the assessee has already applied to the Govt. of West Bengal,for confirmation letter and will get it very soon. Therefore, we direct the Assessing Officer to take into account the sanction letter/confirmation letter of the Government of West Bengal in respect of the rate of interest which is to be charged on such loan and adjudicate the issue as per the provisions of the Income Tax Act. Therefore, we allow this appeal for statistical purposes. Excess depreciation - Held that:- AO had not disputed that the claim made by the assessee was in accordance with the order of tribunal for Assessment Year 2002-03. However, he has not allowed the claim on ground that the order of tribunal has not become final as the department has filed appeal before High Court. We are of the view that further appeal has been filed, in no way, means that the tribunal’s order under consideration is not operational and effective. Unless and until the order of tribunal is reversed by High Court, the same has to be given due effect. Judicial di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed NIL against sl. No.17(k) of Form No.3CD signifying that any liability of a contingent nature has not been debited to the P L A/c. 3.For that the ld. Commissioner of Income Tax(Appeal) further erred in not taking into account the Accounting Standard notified under section 145(2) of the Act with regard to para A.(6)(b) Accrual A.(6)(c) Consistency B.(13)(a) Accounting estimate . 4.For that on the facts and in the circumstances the ld. Commissioner of Income Tax(appeal) wrongly and arbitrarily held that any expenditure claimed on the estimate basis for an unascertained liability is not allowable deduction under the provisions of Income Tax Act. 5.The assessee craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal. 3.1 Although, in this appeal, the assessee has raised a multiple grounds of appeal, but at the time of hearing the solitary grievance of the assessee has been confined to the issue that addition of interest of ₹ 5,37,34,000/- on loan from Govt. of West Bengal made by the AO and confirmed by the CIT(A), whereas the said loan was Pending d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count for the interest on the said loan and the charging of the interest expenditure to the Profit and Loss Account. However, the AO after going through the reply of the assessee held that the expenditure claimed on estimate basis is not an allowable expenditure as per provision of l.T. Act, 1961. Therefore, it proves that the sum of ₹ 537.34 lacs debited as interest on plan loan to the Profit and Loss Account, was merely a provision and the actual quantum of the liability on this part of plan loan was unascertainable during the year and any year prior to this. As per Income Tax Act, provision for any unascertainable liability is not an admissible expenditure. The assessee could not produce any corroborative evidence to prove the reason behind charging interest @ 6.5%. Therefore, the AO disallowed the notional interest expenditure claimed on estimate basis of ₹ 537.34 lacs and added back to total income of the assessee. 3.3 Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. The ld. CIT(A) observed that the disallowance of ₹ 5,37,34,000/- in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest. Therefore it cannot be said that the loan had been taken on commercial terms and interest would have to be necessarily paid on the same. lt was well-known that the assessee company had huge accumulated losses and the government, being 100% owner, may very well decide to give interest free funds to the assessee company. Under these circumstances, in absence of any specific stipulation for interest, there cannot be a presumption that the assessee is liable to pay any interest. Even if interest would have to be paid, as long as the rate of interest was not specifically known, any provision made for the same remains a provisional and unascertained liability. So far as the remark of C AG was concerned, while an auditor may make certain remarks based on his perception, the same cannot determine allowability of a claim for deduction in income tax assessment. Such allowance has to be considered strictly in accordance with the provisions of lncome Tax Act. lt is well settled, that any expenditure claimed on the estimate basis for an unascertained liability is not allowable deduction under the provisions of lncome Tax Act. Same view had been taken in the decision in the case of Rajast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the period of loan sanctioning, the market interest on loan varied from 6.50 percent to 12.50 percent.Therefore, the company provided interest at the rate of 6.25% on the said loan. The ld. Counsel submitted that the said fact had been duly disclosed in the financial statement which was audited by the Government as well as Auditors. The Assessing Officer however observed that expenditure claimed on estimate basis is not an allowable expenditure as per provision of l.T. Act, 1961. Therefore, he disallowed the claim of the interest on account of unascertainable liability. However, the ld. CIT(A) observed that the company has not specified that any interest on the loan is to be charged. The assessee had also pointed out before the ld. CIT(A) that loan was interest free therefore, the ld. CIT(A) observed that based on the facts no any interest is to be charged. The ld. CIT(A) also observed that the said loan had not been taken on commercial term. Therefore, the provision for interest should not be allowed and the ld. CIT(A) held that any expenditure claimed on the estimate basis for an unascertained liability is not allowable deduction under the provisions of Income Tax Act and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the rate of interest to be charged, or not to be charged, on such loan. Therefore, the Counsel prayed the Bench that the assessee has already applied to the Govt. of West Bengal,for confirmation letter and will get it very soon. Therefore, we direct the Assessing Officer to take into account the sanction letter/confirmation letter of the Government of West Bengal in respect of the rate of interest which is to be charged on such loan and adjudicate the issue as per the provisions of the Income Tax Act. Therefore, we allow this appeal for statistical purposes. 3.7 In the result, the appeal filed by the assessee, is allowed for statistical purposes. 4. Now, we shall take Revenue s appeal in ITA No. 590/Kol/2014, for Assessment Year 2007-08, wherein the Revenue has raised the following grounds of appeal: 1.That on the facts and in the circumstances of the case, the CIT(A) erred in holding that excess depreciation of ₹ 4,21,61,956/- was allowable in view of the decision of ITAT in assessee s own case for the Assessment Year 2002-03, ignoring the fact that on the same issue for the Assessment Year 2002-03, the case has been preferred before the Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tribunal s order. This way, ldCIT(A) allowed the claim of the assessee. 4.3 The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 4.4On the other hand, the ld. Counsel for the assessee has submitted that this issue is squarely covered by earlier years order of ld. CIT(A) and Hon ble ITAT, Kolkata. The Hon ble ITAT, Kolkata in ITA No.1198 1199/Kol/2008 dated 07/08/2008 adjudicated the issue in favour of assessee. At the time of hearing, it was explained by the ld. Counsel that the assessee has made claim of depreciation under consideration on the basis of W.D.V arrived at in accordance with tribunal s order for Assessment Year 2002-03 in ITA No.129(Kol)/2006 and ITA No.270(Kol)/2006. Vide the said order, Hon ble Tribunal had confirmed CIT(A) s order directing the Assessing Officer to allow depreciation based on actual W.D.V. Subsequently, in Assessment Year 2004-05 and 2005-06, CIT(A) allowed the consequential claim for depreciation and the tribunal, vide its order dated 7.8.2008 in ITA No.1198 1199/Kol/2008, dismissed the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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