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TMI Blog2022 (4) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to appreciate the fact that the Assessing Officer has clearly mentioned in its assessment order that the assessee is having huge work in progress of various projects, but the interest cost incurred has not been allocated to any of the projects but claimed as expenditure in the P & L account. The Assessing Officer applied the ratio of decision of Hon'ble Supreme Court in the case of British Paints India Pvt. Ltd. (184 ITR 44) and disallowed the interest from the administrative expenses and directed it to be added to the work in progress. 4. The CIT(A) failed to sustain the alternative disallowance of interest of Rs. 1,11,30,410/- on account of interest bearing funds diverted to the sister concern at lower rate of interest. 5. For these and other grounds that may be adduced at the time of hearing, the order of the CIT(A) may be set aside and the order of the Assessing Officer restored." 2. Succinctly stated, the assessee had filed its return of income for the assessment year 2013-14 on 30.09.2013, declaring an income of Rs. 8,65,42,694/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer held the same as bogus and non-existent and added the entire amount to the returned income of the assessee. After, inter alia, making the aforesaid addition/disallowance the Assessing Officer vide his order passed u/s.143(3) of the Act, dated 29.03.2016 determined the income of the assessee at Rs. 10,40,16,239/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). In so far the disallowance of interest expenditure of Rs. 1,61,56,414/-(supra) was concerned, it was observed by the CIT (Appeals), that a similar addition that was made in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13 was deleted by his predecessor and his order, thereafter, was confirmed by the Tribunal in ITA No.166/PAN/2016, dated 22.11.2016. Accordingly, the CIT(Appeals) respectfully followed the order of the Tribunal and vacated the disallowance of Rs. 1,61,56,414/- (supra) that was made by the Assessing Officer towards interest paid on bank OD. As regards the addition of Rs. 7,62,165/- that was made by the Assessing Officer u/s.41(1) of the Act, it was observed by the CIT(Appeals) that the assessee on the basis of bank statements had de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid claim of the Ld. DR, it was submitted by the Ld. Authorized Representative (for short 'AR') for the assessee that involving identical facts the asesssee's claim for deduction of interest paid on OD account was disallowed by the Assessing Officer in its case for the immediately preceding year i.e. A.Y.2012-13 which, thereafter, was set-aside by the CIT(Appeals). It was further submitted by the ld. AR that the order of the CIT(A) in the assessee's appeal for AY 2012-13 had thereafter been upheld by the Tribunal in ITA No.166/PAN/2016, dated 22.11.2016. It was submitted by the Ld. AR that as the issue was squarely covered by the order passed by the Tribunal in the assessee's own case for the immediately preceding year, therefore, no infirmity could be related to the order of the CIT(Appeals) who had rightly followed the view taken by the Tribunal and vacated the disallowance of interest expenditure for the year under consideration. Adverting to the deletion of the addition made by the CIT(Appeals) qua the liability that had ceased to exist u/s 41(1) of the Act, the Ld. AR submitted that as the assessee had substantiated to the hilt that liability of Rs. 5,60,566/- (supra.) was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al estate and construction and the assessee is partner in the said firm MDC having 50% share in profits. The assessee paid interest of Rs. 1,59,27,795/- to the Andhra Bank on OD of Rs. 10 crores which is stated by the assessee to be sanctioned for working capital purposes. The assessee has in all advanced Rs. 30 crores to its sister concern MDC as at 31-03-2012 on which interest income of Rs. 3,37,40,072/- @12% p.a. was earned by the assessee which was offered for taxation by the assessee. The statement has been made before us by learned counsel for the assessee that the assessee had paid interest in the preceding year to the Andhra Bank of Rs. 94,95,392/- on OD account which was allowed by the Revenue in the assessment framed u/s 143(3) of the Act and no additions have been made in the WIP, which is not controverted by the learned Departmental Representative and rather conceded by ld DR. We have further observed that as per Accounting Standard AS-2 relating to the inventories issued by ICAI , it has been stipulated in Accounting Standard AS-2 that interest cost will not be added to the inventories, as under:- "Interest and other borrowing costs are usually considered as not rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately preceding year i.e AY 2012-13, had concurred with the CIT(A) who had vacated the disallowance of interest expenditure that was made by the Assessing Officer by adding the same to the closing WIP. We find that the aforesaid order of the Tribunal had thereafter been approved by the Hon'ble High Court of Bombay in the case of Pr. CIT Vs. Milroc Good Earth Property and Developers Ltd., Tax Appeal No. 109 of 2017, dated 28.02.2018. The Hon'ble High Court while approving the view taken by the Tribunal had observed as under: "5. We have heard Ms. Susan Linhares, learned Standing Counsel for the Revenue and Mr. A. Kulkarni, learned Counsel for the Respondent. 6. Ms. Linhares, the learned Standing Counsel for the Appellant urged that the appeal involves the question of law, namely whether the Tribunal has ignored the fact that the Assessee has taken loan for development and construction of residential buildings and the findings that the loan was taken for working capital requirement cannot be directly attributed to the work in progress, is incorrect. Mr. Kulkarni, the learned Counsel for the Respondent-Assesses submitted that the question raised is a question of fact and no q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the authorities have rendered a concurrent finding of fact. The learned Standing Counsel for the appellant has not been able to demonstrate as to how the question of law will still arise, if the question of fact rendered by both the authorities are confirmed. The scope of the appeal under Section 260A of the Income Tax Act, is well settled. The High Court will entertain an appeal on pure questions of facts rendered on the assessment of evidence. 9. In the circumstances, since no question of law is involved and we are only called upon to adjudicate the questions of fact, the appeal cannot be entertained and the same is dismissed." 8. As the facts and the issue involved in the present appeal of the revenue remains same as were there in its case for the immediately preceding year i.e. A.Y.2012-13, therefore, we find no infirmity in the view taken by the CIT(Appeals), who in our considered view had rightly relied upon the order of the Tribunal in the assessee's own case for the immediately preceding year i.e. A.Y.2012-13 and vacated the disallowance of the interest paid on bank OD of Rs. 1,61,56,414/-. We, thus, uphold the view taken by the CIT(Appeals) and dismiss the Ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court of Bombay. 12. We have given a thoughtful consideration to the aforesaid issue before us and concur with the claim of the Ld. AR that the grievance of the department qua the alternate disallowance of interest of Rs. 1,11,30,410/- (supra) being devoid and bereft of any merit, thus, cannot be accepted. As observed by us hereinabove, now when the assessee had recovered the entire amount of interest that was charged by the bank on the amount which was advanced by it to its sister concern, therefore, as stated by the ld. AR, and rightly so, the claim for deduction of interest expenditure stood nullified in the backdrop of the corresponding interest income that was received from the sister concern. Apart from that, we find that a similar alternate disallowance of interest expenditure that was made by the Assessing Officer in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13 was vacated by the Tribunal, and the said order had thereafter been approved by the Hon'ble High Court of Bombay. Backed by our aforesaid observations we find no merit in the aforesaid grievance of the revenue that the CIT(Appeals) had erred in not sustaining the alternate disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 609/- [ Rs. 74,030/- (+) Rs. 1,27,306/-] as a trading liability which had ceased within the meaning of section 41(1) of the Act during the year under consideration. As per section 41(1) of the Act, where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year, the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year. 18. In sum and substance, the ceased liability can be added u/s. 41(1) of the Act only in the year, when some benefit in respect of trading liability i.e., by way of remission or cessation thereof, had been obtained by the assessee. As such, the addition of a trading liability which had ceased can only be made in the previous year, in which, some benefit in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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