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TMI Blog2025 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 2.02 crores was called for since the assessee had established both to the AO and the PCIT that the assessee had not claimed the said amount as an expense in violation of provisions of section 43B, having paid the same before the due date of filing the return of income, which fact was certified by the Tax Auditor in its Tax Audit Report. The bonus was clearly demonstrated to be not unpaid. DR was unable to controvert the factual contention of the Ld.Counsel for the assessee b, both with regard to the examination of the impugned issue by the AO and the fact of the assessee having demonstrated both to the AO and the Ld.PCIT of the bonus not remaining unpaid, but in fact paid before the due date of filing of return of income. DR was unable to point any infirmity accordingly in the allowance of claim of Bonus of Rs. 2.02 Crs by the AO in terms of the provisions of section 43B of the Act. Therefore, we hold that the AO had taken a legally correct view by not making any disallowance of bonus expenses. Allowance of interest expenses paid on PFC loan (RAPDRP) against in alleged violation of provisions of section 43B on account of the same, having remained unpaid - Only explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout not being examined by the AO - Decided in favour of assessee Partly. X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Accordingly, invoking Explanation-2 to section 263 of the Act, as per which any order passed without making any enquiries or verification which should have been made is deemed to be erroneous causing prejudice to the Revenue, the Ld.PCIT held that the assessment order passed in the present case was erroneous causing prejudice to the Revenue and, accordingly, he set aside the assessment order passed by the AO directing him to pass fresh assessment order. 5. We have heard both the parties, gone through the order of the Ld.PCIT and perused the material available on record. The argument of the ld.counsel for the assessee viz-a-viz all the three issues noted by the Ld.PCIT to have not been properly examined by the AO was- (i) That, all the issues were examined/enquired into by the AO during the course of assessment proceedings, due reply filed by the assessee, after considering which the AO took legally correct view of no disallowance/addition to be made in the hands of the assessee. (ii) That, necessary explanation, in this regard, that there was no error in the order of the AO vis a vis the impugned issues, was also furnished to the Ld.PCIT, who disregarded the same and went o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the income-tax return. Copy of the Tax Audit Report reflecting the said fact was placed before us, wherein it was pointed out that the assessee at point No.26(i)(B)(a) had reflected bonus of Rs. 2.02 crores as liability incurred during the impugned year paid on or before the due date of filing the return of income u/s.139(1) of the Act. 10. With regard to the submissions made before the Ld.PCIT on this issue, our attention was drawn to the assessee's reply in response to the notice issued by the Ld.PCIT u/s.263 of the Act, which was placed before us at page Nos.62 to 74 of the Paper Book submitted by the assessee. More particularly, our attention was drawn to PB at page No.60, wherein the assessee had in very clear terms submitted to the Ld.PCIT that the amount of bonus of Rs. 2.02 crores stood paid before the due date of furnishing of return of income u/s.139(1) of the Act , which fact it was stated was verifiable from the Tax Audit Report for the year, copy of which was also furnished to the Ld.PCIT along with reply. The assessee, had, therefore, stated that there was no need in adding back the said amount of bonus which already stood paid by the assessee. 11. Considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 7.1. Explanation 2 to Section 263 of the I.T. Act has been inserted by the Finance Act, 2015 w.e.f. 01/06/2015. The relevant portion of the same is reproduced as under: Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the finding of the Ld.PCIT that the assessee has now furnished fresh details which needed to be looked into by the AO and verified, is found to be incorrect by us. 15. Moreover, we agree with the Ld.Counsel for the assessee that even on merits, no disallowance of bonus amounting to Rs. 2.02 crores was called for since the assessee had established both to the AO and the Ld.PCIT that the assessee had not claimed the said amount as an expense in violation of provisions of section 43B of the Act, having paid the same before the due date of filing the return of income, which fact was certified by the Tax Auditor in its Tax Audit Report. The bonus was clearly demonstrated to be not unpaid. 16. The Ld.DR was unable to controvert the factual contention of the Ld.Counsel for the assessee b, both with regard to the examination of the impugned issue by the AO and the fact of the assessee having demonstrated both to the AO and the Ld.PCIT of the bonus not remaining unpaid, but in fact paid before the due date of filing of return of income. The Ld.DR was unable to point any infirmity accordingly in the allowance of claim of Bonus of Rs. 2.02 Crs by the AO in terms of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.PCIT that these loans were issued with the term and condition that they would be converted into capital grants on the fulfilment of certain stipulated condition and the fulfilment of the conditions was to be seen up to January-2017 after which if the conditions were found to be not furnished, the loans were to be repaid with interest in installments over a period of four years. It was also pointed out that the assessee had explained to the Ld.PCIT that this moratorium period upto January-2017 had been extended upto January-2022. Similar explanation had been furnished with respect to the APDRP scheme loan also. Our attention was drawn to the contents to the same, is as under: "2) Interest accrued but not due on loans from PFC It has been stated in the notice that there was interest amounting to Rs. 17,91,17,390/- accrued but not due on loans from PFC, which remained unpaid till the date of filing of the Return, has not been disallowed by the Assessing Officer under section 438 white completing assessment under section 143(3) of the IT Act. It is submitted that the facts of the case have not been considered in totality. This is because although the Loan was from PFC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act and various Accounting Standards, it has to mandatorily recognize and account the interest accrued on all the borrowings, the Company has accounted the said interest. However, the provisions of section 43B of the IT Act cannot be made applicable to the same. The law is well settled on the issue that the book entries are totally irrelevant for the purpose of making allowances and/or disallowances under any provision of the IT Act." Under the circumstances, it is submitted that there is no infirmity in the claim of interest on PFC loan under 43B of the IT Act 1961 and the issue requires no revision. 21. The Ld. DR however relied on the order of the Ld.PCIT. 22. Having considered the contentions of both the parties, we do not find any infirmity in the finding of error by the Ld.PCIT on this issue of interest on PFC loans of Rs. 17.91 Crs being allowed by the AO without proper inquiry. The fact that this interest remained unpaid during the year is not disputed by the assessee. The assessee admits to the same in its explanation furnished to the Ld.PCIT and also the AO. It is also not disputed that such interest is allowable only on payment basis as per section 43B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumer Contribution during the year and those pertaining to the preceding year. The AO, however, was not satisfied with the explanation of the assessee noting that the assessee had not furnished the year-wise bifurcation of the amount transferred to the P&L A/c. and, therefore, he went on to make his own calculation of the amount of such grants and contributions which needed to be transferred to the P&L a/c. during the year. As per the AO, the assessee ought to have written back @ 15% of the grants and consumer contribution, which according to him worked out to Rs. 17,464.94 lakhs and noting that the assessee had transferred only an amount of Rs. 9568.27 lakhs, the remaining amount as per the AO of Rs. 11,317.93 lakhs was added back to the income of the assessee. The Ld.PCIT therefore noted that the AO had made addition of Rs. 11,317.93 lakhs to the income of the assessee on account of amounts to be written back to the P&L A/c. from Capital Grants & Subsidies and Consumer Contribution received by the assessee. 26. The Ld.PCIT noted a mistake in this calculation of Rs. 11317.93 lakhs added back by the AO to the income of the assessee. He noted that while the assessee had transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee pointed out that in the revisionary proceedings, the assessee had clarified to the Ld.PCIT that his entire basis for holding that the addition made by the AO on this amount was erroneous was based on incorrect appreciation of facts. He pointed out that it had been clarified to the Ld.PCIT that the assessee has not transferred an amount of Rs. 900.61 lakhs but, in fact, transferred an amount of Rs. 9568.27 lakhs. That, accordingly, the AO had not allowed any excess deduction or relief as compared to the amount noted to be allowable by the AO of Rs. 6148.01 lakhs. In fact, the assessee had added back a greater amount of Rs. 9568.27 lakhs as compared to Rs. 6148.01 lakhs found to be allowable by the AO. In this regard, he drew our attention towards the reply filed to the Ld.PCIT at page No.65 of the PB submitted by the assessee, is as under: "THUS, TOTAL AMOUNT OF ₹95,68,27,264.55/- HAS BEEN TRANSFRRED TO PEL ACCOUNT WHICH IS 5.28% (ON SLM BASIS) OF THE GRANTS RECEIVED STARTING FROM THE FINANCIAL YEAR 2005-06 TO FINANCIAL YEAR 2016-17. SO HOW IT CAN BE SAID THAT ONLY 29,00,61,893.19/- HAS BEEN TRANSFERRED TO THE PEL ACCOUNT THOUGH THE AMOUNT TRANSFERRED O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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