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Judgment
Per Satbeer Singh Godara, Judicial Member:
This Revenue’s appeal for Assessment Year 2023-24, arise s against the Addl./JCIT(A)-6, Chennai’s DIN & order No. ITBA/APL/S/250/2024-25/1074089550(1) dated 06.03.2025, in proceedings u/s 143(1) of the Income Tax Act, 19 61.
Heard both the parties at length. Case file perused.
This Revenue’s appeal raises the following substantive grounds:
“1.Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing the appe als o f the assessee by de leting the addition made by the C PC amounting to Rs.68,83,13,581/- on acco unt of disallo wance u/s 43B of the Act in any procee ding previous ye ar but allo wable during the previous ye ar? ”
We next note with the able assistance coming from both the parties that the learned CIT(A) has reversed the Assessing Officer’s action invoking section 43B disallo wance in the assessee’s case amounting to Rs.76,51,32,853/- in section 143(1) processing dated 03.05.2024; reading as under:
“4. Decision:
4.1The appeal has been filed against the orde r of the DCIT, CPC u/ s 143(1) date d 03/05/ 2024. On 30-10-2023, the appellant filed return declaring income of Rs.28,73,74,310/-. The said re turn was further revised on 31-12- 2023 decl aring income of Rs.28,33,08,030/-. The AO, in his intimation u/s 143(1) adde d a sum of Rs. 76,51,32,853/- as proposed adjustment to to tal income creating a demand against the assessee amounting to Rs.12,74,07,270/-. Aggrieved, the prese nt appeal has been filed, raising two grounds.
4.2On the issue of Disallo wance of Rs .76,51,32,853/- on account of “Any amount disallowe d unde r sectio n 43B in any prece ding pr evious year but allo wable during the previous year.”, the appe llant avers that the total amount of Rs .76,51,32,853/- c laimed in the income tax re turn as “Any amount disallo wed under section 43B in any preceding year but allo wable during the previous year” has been c laimed in 2 limbs. The de tails are hereunde r:
Nature of
Liability
Outstanding Opening Balance not allowed in earlier previous years Amount paid/set off during the year Amount Written back to the Profit and Loss Account COLUMN 1 COLUMN 2 COLUMN 3 Bonus 196735 96967 Leave Encashment Payable 253640 244709 Interest to Fl/Banks: PICUP 434634569 38357666 396276903 ALLAHABAD BANK 45366962 38119930 7247032 STRESSED ASSETS STABILISATION FUND 284789646 284789646 TOTAL 765241552 76819272 688313581 The amount claimed by the assessee company i.e. Rs.76,51,32,853/- is the aggregate of Co lumns 2 and 3 above.
In respect of the amount of Rs. 7,68,19,272/- claimed by the appellant that it was paid during the FY 2022-23, appe llant avers that The fact of payment of Rs.7,68,19,272/- has been verified and duly cer tifie d by the Tax Auditors o f the company in their Tax Audit Re port at Point No . 26. R elevant e xtract of the Tax A udit Report is filed in response to the no tices u/ s 250.
4.3The averments have bee n considered. In the tax audit re por t, the audito r has certified that Rs. 7,68,19,272/- was paid during the FY 2022-23. The relevant e xtract of the report is given below: From the above, it is seen that the amount of Rs.7,68,19,272/- was paid during the FY 2022-23. Hence the addition o f Rs.7,68,19,272/- is delete d. Appellant has fur ther submitte d that the appellant company had outstanding loans from Indian B ank (Formerly Allahabad Bank) , PIC UP Ltd. and SASF. That, further, during the year under conside rat ion, the appe llant company ente re d into One Time Se ttlement (he reinafter re ferre d to as “OTS”). As per the terms of the OTS the appellant company made the following payments to the 3 financi al institutions as detaile d hereunder:
Calculatio n of Opening Principal & I nterest Amount Written Off during the Ye ar F .Y. 2022- 2023
Indian Bank (Formerly Allahabad Bank) SASF PICUP Balance O/s as on 31.03.2023 76,957,102 284,789,646 499,634,569 Less: Allahabad Bank Refund A/c Dr. Balance 9,672,202 0 0 67,284,900 284,789,646 499,634,569 Less: Bank Guarantee Margin - FDR 203,000 0 0 67,081,900 284,789,646 499,634,569 Break up of Opening Balance Principal 21,714,938 0 65,000,000 Interest 45,366,962 284,789,646 434,634,569 Total of Opening Balance 67,081,900 284,789,646 499,634,569 Add: Interest during the year 2,986,132 0 23,137,077 Total to Pay 70,068,032 284,789,646 522,771,646 Payments Paid during the year current Interest 2,986,132 0 23,137,077 Paid during the year old Interest 38,119,930 0 38,357,666 Paid during the year Principal 21,714,938 0 65,000,000 Paid during the year 62,821,000 0 126,494,743 Amount to be Written Off (in Old Intt.) 7,247,032 284,789,646 396,276,903 On the basis o f the OTS entere d into by the appellant company with the 3 financial ins ti tutio ns, an aggregate amount of Rs.68,83,13,581/- (7247032 + 284789646 + 396276903) was writte n off and credited by the appellant company in its bo oks under the head “Other Income” and the said amount was credited to the Pro fit & Loss compiled for the year under consideration.
The appellant com pany has submitte d the certified copy of “Statement of Pr ofit and Loss for the year ended 31st March 2023” disclosing ‘Othe r Income’ at Rs.722,945,729/- which fo rms part of this submission as along with the schedule of ‘Other Income’ which very clearly reve als that an amount of Rs.688313581/- has been credited to other income on acco unt of “Amount writte n off on OTS of Term Loans”. The certifie d copies of P & L account and relevant sc hedule is repro duced hereunder:
The appe llant in its submission relies upon the fo llo wing case law:
1.CIT vs. SAMUDRA SHOE OVERSEAS LTD. (MADRAS HIGH COURT) T CA NO. 349 OF 2016 (COPY OF JUDGEMENT IS SUBMITTED).
2.DCIT vs. K.S.DIESELS LT D (ITAT, MUMBAI) ITA NO. 599/MUM/2019 (COPY OF J UDGEMENT IS SUBMITTED).599/MUM/2019 (COPY OF J UDGEMEN T IS SUBMITTED).
In the case of DCIT vs. K .S. Dies els Ltd., the Ho n’ble Members of the IT AT, Mumbai have held as under:
“We have deliber ated at length on the issue in hand and find that the controve rsy involved in the present case hinges aro und the maintainability of the assessee"s claim for deduction of interest of Rs. 3,23,84,509/- (supra). It is the claim of the assessee that as the aforesaid interest aggre gating to Rs.3,23,84,509/- was not actually paid by it in the years to which they pertained i.e A.Y 2002- 03 to A.Y 2008-09, therefore , while computing its income for the said respective years it had suo motto disallowed the same as per the mandate of Sec. 43B o f the Act. We may herein observe, that as held by the CIT(A), and rightly so , as the assessee had afte r OTS paid interest of Rs. 1,91,19,083/-during the year unde r consideration and no t the entire amount of Rs .3.23,84,509/-, interest/part thereo f in a subsequent year in which the same had bee n waive d under OTS would result to a double taxation of the said amount. Our aforesaid view is for tifie d by the judgment of the Hon”ble High Court of Madras in the case of CIT VS. M/s Samudr a Shoe Overseas Ltd, TCA No. 349 of 2016, dated 06.06.2016. It w aswas obser ved by the Hon"ble High Court that the interest payable by the assessee to the financial institution which was earl ier disallo wed u/s 43B of the Act was eligible as a deductio n on the waiver o f such interest by the bank in One Time Settlement (OTS).
10.Backed by the facts involved in the case befo re us, we are of the considere d view that as the assessee as per the terms and co ndi tio ns o f the OTS had during the year under conside ration made a payment of interest of Rs.1,91,19,083/- to GIIC out of the inte re st of Rs.3.23,84,509/- (supr a) that was disallo wed u/s 43B in the said ear lier years, there fore , such sum so actually paid would be eligible as a deduction during the year unde r conside ration u/s 43B o f the Act. As regards the balance amount o f intere st of Rs.1,32,65.426/- (Rs.3,23,84,509/-(-) Rs.1,91,19,083/-], we co ncur with the view tak en by the CIT(A) that if the said amount was disallowed u/s 43B in the ear lier years and had been cr edite d by the assesee company in its Profit and loss acco unt for the year under conside ration on account of waiver of interest income payable to GIIC , then, the claim of the assessee for deductio n of such amount in its computation o f inco me is in o rder. We, thus, in terms o f our aforesaid o bservat ions find no infirmity in the view taken by the CIT(A) who had directed the A.O to carry out certain verifications, viz, (i). that the inte rest waived was credited in the profit & loss a/c of the assessee company for the year under conside ration; and (ii). that the inte rest waive d had been include d in the figure o f „Pro fit" as per the profit & loss a/c taken to the computation of i nco me; and (iii).that such interest payable to GIIC w as disallowed u/s 43B in the earlier ye ars.
Accordingly, in ter ms of our afo resaid obse rvations finding no infirmity in the view taken by the CIT(A) we uphold his order in terms of our afo resaid obse rvatio ns.”
Accordingly, the A O is directe d to carry out the follo wing verifications:
(i)that the interest waived was credited in the profit & loss a/c of the assessee company for the year under conside ration;
(ii)that the interest waived had been included in the figure of “Profit” as per the profit & loss a/c taken to the computation o f income; and
(iii)that such intere st payable to the Banks was disallo wed u/s 43B in the earlier years.
Consider ing the case law referred by the appellant and submission made by it, this gro und is allowe d. The se cond ground being gene ral in nature is no t being adjudicated.
5.In the result, the appeal is allowe d.”
We make it clear that the Revenue’s sole endeavour in the instant appeal is to revive the above latter component amounting to Rs.68,83,13,581/- arising from the asse ssee’s onetime settlement of term loans with various banks and financial institutions declared as “Account written off as OTS of term loans”.
That being the case, lear ned CIT-DR vehe mently argues that the CPC’s impugned processing had rightly invoked section 43B of the Act to conclude that the impugned sum could not be allowed as a business deductio n on actual payment. She could hardly dispute that the instant sole issue already stands de cided in the assessee’s favour and against the department in various judicial prece dents (supra) that such a onetime settlement amount writte n off indeed qualifies as a business deduction in the relevant financial year. This is indee d couple d with the fact that the learned CIT(A) has still directed the Assessing Officer to verify all the relevant facts whilst finalizing his consequential computation. We thus find no merit in the Revenue’s instant sole substantive ground which stands rejected therefore.
No other ground or argument has been pressed before us.
This Revenue’s appeal is dismissed.