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TMI Blog2021 (12) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of fact recorded by the learned CIT(A) nor bring on record any decision in favour of the Revenue to support its arguments that before claiming deduction on payment basis in terms of section 43B of the Act, the assessee needs to record such interest in the previous year to which such interest pertains. Therefore, we are of the considered view that there is no error in the reasons given by the learned CIT(A) to delete additions made by the Assessing Officer towards disallowance of interest paid to bank u/s.43B - Decided against revenue. - I.T.A. No. 2513/Chny/2018 - - - Dated:- 30-11-2021 - SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER Appellant by : Mr. AR.V. Sreenivasan, Addl.CIT Respondent by : Mr. S.Sridhar, Advocate ORDER Per G. MANJUNATHA, AM: This appeal filed by the Revenue is directed against the order of the learned CIT(A)-1, Chennai dated 21.06.2018 and pertains to assessment year 2015-16. 2. The Revenue has raised the following grounds of appeal:- 1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case. 2.1 The Ld. CIT(A) failed to appreciate that the assessee was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, the assessee has not provided for any interest on loans in its books of account. It was further submitted that Canara Bank has entered into an assignment agreement on 26.06.2014 for assignment of debt to Edelweiss Asset Reconstruction Companies Ltd. Thereafter, the assessee has settled loan by making one time payment of ₹ 5,04,00,000/- as against outstanding loan amount of ₹ 1,71,93,738/-. The difference amount of ₹ 3,32,06,262/- has been claimed as deduction u/s.36(1)(iii) r.w.s. 43B of the Income Tax Act, 1961. 5. The learned CIT(A) after considering relevant submissions of the assessee and by relied upon certain judicial precedents, including decision of the Hon ble Madras High Court in the case of M/s. Chemicals Plastics India Ltd. Vs. CIT (2003) 260 ITR 193, held that when the assessee has availed loan from bank for the purpose of its business, interest payable in respect of said loan is allowable deduction. Further, said interest was admissible in the respective year to which it pertains, but same was deductible in the year in which such interest was paid to banks in view of specific provisions of section 43B(e) of the Income Tax Act, 1961. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination as to how the matters had been dealt with by the assessee, in the relevant books, irrespective of the fact that the assessee had paid the total sum of ₹ 3,30,284 in the assessment year in question in which deduction was claimed in regard thereto on the basis of the then introduced section 43B. Very simply put, our opinion is that there is no part of this section or the Income-tax Act itself which requires that when deduction is claimed on the basis of section 43B, the assessee must satisfy the twin test of both proving actual payment of the due tax or cess in the previous year in question as well as satisfying the Department that due provision had been made in the books in regard to such duty or tax for which payment was made later on. To introduce this double test would be writing words into the section which neither the Tribunal nor the court is entitled to do. In other parts of the Act, where provision in the books is given a special status, and that is specifically called for but section 43B is not one such section. The Tribunal therefore, went wrong in law in seeking to open up an enquiry as to the way provision had been made in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had, in the previous year corresponding to the assessment year 1984-85, imported materials required for the manufacture of the assessees products. The assessee had paid import duty of ₹ 35,09,826. According to the assessee the cost of the imported materials inclusive of duty was taken to the profit and loss account only on consumption basis. The balance of import duty of ₹ 11,58,833 paid on the raw materials held as closing stock, was taken into the balance sheet and shown as part of current assets. Schedule 15 of the balance sheet set out the current assets, loans and advances, In that schedule, under the heading Inventories value of raw materials held in stock was shown. The value of the raw materials stated therein, according to the assessee, includes this stun of ₹ 11,58,833/-. Similarly excise duty paid on finished goods held as closing stock was shown as part of the inventory under the current assets in the balance sheet. The assessee s claim under section 43B of the Act for deducting the actual customs duty and excise duty paid on the stock of raw material and finished goods was negatived by the Assessing Officer, the Commissioner and finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly ascertained by valuing closing stock as also the opening stock including therein the duty paid on such stock. 10. The decision of the Madras High Court has been upheld of the Hon'ble Supreme Court in the case of Berger Paints India Ltd Vs.CTT (2004) 266 ITR 99. The TTAT in the case of ACIT Vs. Mangalam Cement Ltd (2017) 78 taxmann.com 234 (Jaipur-Trib) had occasion to consider claim u/s.43B when no entry was made in books and the liability, was also being disputed by the appellant. The ITAT held as under: We have heard the rival contentions and pursued the material available on record The demand of service tax of ₹ 13,59,941/- was paid on 09.06.2007 as per CESTAT order dt. 16.04.2007, The Land tax of ₹ 54,30,165/- was paid on 29.10.2007 Iand tax of s. 19,36,850/- was on 27.102007 in view of the order of Hon ble Rajasthan High Court dt. 10.10.2007. Further, the land tax of ₹ 54,30,165/- was paid on 07.02.2008 as per the order of Hon ble Rajasthan High Court dt. 01.11.2007. The service tax and land tax are statutory liabilities which are paid during the year as per the order of the CESTAT and Hon ble Rajasthan High Court. These are statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that learned CIT(A) has failed to appreciate fact that the assessee was not able to establish nexus between business and loans and impugned interest claimed cannot be allowed u/s.36(1)(iii) of the Income Tax Act, 1961. The learned DR further submitted the learned CIT(A) failed to appreciate that provisions of section 43B of the Act clearly mandates that deduction under said section shall be only on actual payment irrespective of previous year in which said payment would otherwise be allowable. The learned CIT(A) failed to appreciate fact that for allowing deduction u/s.43B of the Act, requisite condition is that it should have been recorded in books of account of the previous year in which it pertains, prior to making claim of deduction u/s.43B of the Act. 7. The learned AR for the assessee, on the other hand, supporting order of the learned CIT(A) submitted that as per provisions of section 43B of the Act interest on term loans borrowed from bank is deductible on payment basis, in the year in which such interest was paid and hence, the assessee has rightly claimed deduction for interest on loans paid to bank for the impugned assessment year, when said interest has been ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed outstanding debts by making one-time payment of ₹ 5,04,00,000/- as against outstanding balance of ₹ 1,71,93,738/- and difference amount of ₹ 3,32,06,262/- has been accounted as interest payable on loans. The assessee had claimed deduction for said interest u/s.36(1)(iii) on payment basis in terms of provisions of section 43B(e) of the Income Tax Act, 1961. The learned CIT(A) after considering relevant facts and also by following certain judicial precedents, including decision of the Hon ble Madras High Court in the case of M/s. Chemicals Plastics India Ltd. Vs. CIT (supra), had held that once loan availed from bank has been utilized for the purpose of its business, interest payable in respect of said loans is allowable as deduction. The learned CIT(A) further recorded that deduction towards interest was admissible in respective year to which it pertains, but same was allowable only on payment basis in terms of section 43B of the Act. Since the assessee has made payment of interest on loans for impugned assessment year, it has rightly claimed deduction towards said interest on payment basis, as per provisions of section 43B of the Act. The findings of fact rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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