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TMI Blog2025 (3) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.Ys 1993-94 to 1997-98 has been discharged by the assessee during the A.Y 2018-19 and claimed as expenditure.
Assessee's claim of interest tax expenditure during the A.Y 2018-19 disallowed by the A.O and that of the CIT(A) is erroneous and hence, we set aside the order of the CIT(A) and allow the claim of the assessee of interest expenditure for the A.Y 2018-19. Thus, the grounds of appeal raised on this issue of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing an order u/s. 143(3) r.w.s 143(3A) and 143(3B) of the Act by recomputing the total income by reducing the current year loss to Rs. 5,99,81,253/- on account of disallowance of interest tax payment of Rs. 9,98,46,515/-during the A.Y 2018-19. Further, though no tax is payable on the assessed loss, the Assessing Officer has charged interest u/s.234C of the Act to the extent of Rs. 89,63,903/- and after reducing the TDS claimed, a net demand of Rs. 61,53,499/- was raised. While completing the Assessment the following additions/disallowance have been made by the A.O. a) Disallowance of claim of interest tax paid to the extent of Rs. 9,98,46,515/- b) Disallowance of Rs. 69,699/- on account of delay in payment of employees' contribution to PF and c) Levy of interest u/s.234C to the extent of Rs. 89,63,903/-. 5. The extract of the A.O's finding is given below: "a). Expenditure under head "Extraordinary items" (i) in response to the show cause notice issued, assessee submitted that it has claimed only the payment of "Interest Tax Demand" and not income tax. Further, it has submitted that the said claim of the deduction is allowable as per section 18 of Interest Tax Act, 1974 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer did not suspect the actual payment. The liability to pay the interest tax demand arose only during the previous year relevant to the assessment year 2018-19 and not during the assessment years 1993-94 to 1997-98. When a draft assessment order proposing disallowance of the claim of interest tax payment made, a reply was given to the Assessing Officer to the effect that as per section 18 of the Interest Tax Act of 1974, interest tax paid /payable is allowable in computing the taxable income. Further, as per the return of income filed, no interest under section 234C is payable as the returned income is only a "loss" and interest under section 234C cannot be increased or charged over and above the amount as per the return of income, while completing the scrutiny assessment. Since no interest under section 234C is payable as per the return of income, the charging of interest u/s.234C as per the scrutiny order is not correct and requires to be deleted. 7. Aggrieved by the order of the A.O, the assessee preferred an appeal before the Ld. CIT(A)/NFAC, Delhi. 8. On perusal of the order of the A.O and submissions made by the assessee the Ld. CIT(A) confirmed the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to income-tax under the head "profits and gains of business or profession" or under the head "income from other sources", the interest-tax payable by the credit institution for any assessment year shall be deductible from the income, under the respective heads, of the credit institution assessable for that assessment year." 10. Further, the Ld. AR brought to our notice that the Interest-tax for the A.Ys 1993-94 to 1997-98 which was claimed as an expenditure in the respective A.Ys by the assessee under the Income-tax Act, have been added back to the assessed income by the A.O in its order u/s. 143(3) r.w.s 250 of the Act in pursuant to the order of the ITAT in ITA Nos.1413(Mds.)/2000, 100(Mds.)/1999, 1669(Mds.)/2000 & 936 & 937(Mds.)/2003. The Co-ordinate Bench of the Tribunal in the above cases held that the Interest-tax is not liable to be paid by the assessee as the provisions of Interest-tax Act, 1974 are not applicable since it is not a credit institution is mainly engaged in the promotions of State of Tamil Nadu by holding as under: "The assessee company does not come within the purview of the definition of term "finance company", as defined under section 2(5B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the AYs 1993-94 to 1997-98 (P.B Page Nos.21 to 26) as detailed below: Assessment Year Interest-tax paid 1993-94 Rs. 2,16,04,128/- 1994-95 Rs. 2,99,05,594/- 1995-96 Rs.1,70,17,291/- 1996-97 Rs. 1,48,44,490/- 1997-98 Rs. 1,64,75,012/- Total Rs. 9,98,46,515/- 14. In light of the above facts, the Ld. AR stated that the expenditure which has been paid by the assessee during the A.Y 2018-19 towards interest-tax in accordance with the decisions of the Hon'ble Supreme Court & Hon'ble High Court of Madras has been rightly claimed in the profit and loss account as an expenditure and hence, prayed for setting aside the order of the Ld. CIT(A) and allow the appeal of the assessee. 15. Per contra, the Ld. D.R relied on the orders of the lower authorities which is based on the section 18 of the Interest-tax Act, 1974 and hence, prayed for dismissal of the appeal of the assessee. 16. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the assessee is wholly owned company of Govt. of Tamil Nadu carrying on the business of providing long term credit to the industrial units for promotion of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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