Criteria for allowance of interest under Section 36(1)(iii) of the Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “A” : HYDERABAD
(THROUGH VIDEO CONFERENCE)

BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
I.T.A. No. 301/HYD/2018
Assessment Year: 2014-15

K.L.R.Industries Ltd.,
HYDERABAD
[PAN: AABCK7920K]
(Appellant) 

Vs

The Income Tax Officer,
Ward-2(1),
HYDERABAD
(Respondent)

For Assessee : Shri S.Rama Rao, AR
For Revenue : Shri Sunil Kumar Pandey, DR

Date of Hearing : 18-05-2021
Date of Pronouncement : 01-07-2021

O R D E R

PER S.S.GODARA, J.M. :

This assessee’s appeal for AY.2014-15 arises from the CIT(A)-8, Hyderabad’s order dated 22-11-2017 passed in caseNo.0261/CIT(A)-8/Hyd/2016-17, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2. The assessee has pleaded the following substantive grounds in the instant appeal:

“1.The order of the learned Commissioner of Income-tax (appeals) is erroneous both on facts and in law.

2. The learned Commissioner of Income-tax (appeals) erred in confirming the addition made by the Assessing Officer of  Rs.52,66,579/- holding that interest is not allowable in view of the provisions of Sec.36(1)(iii) of the Act.

3. The learned Commissioner of Income-tax (appeals) erred in confirming the addition of Rs.4,20,674 made by the Assessing Officer by applying the provisions of Sec.40(a)(ii) of the I.T.Act.

4. The learned Commissioner of Income-tax (appeals) erred in confirming the addition of Rs.13,29,652 made by the Assessing Officer applying the provisions of Sec.40(a)(ia) of the Act.

5. The learned Commissioner of Income-tax (appeals) erred in confirming the addition of Rs.3,00,000 made by the Assessing Officer by disallowing the business promotion expenditure.

6. The learned Commissioner of Income-tax (appeals) erred in confirming the action of the Assessing Officer with regard the profit on sale of assets of Rs.3,95,276/-”.

3. Coming to the assessee’s first and foremost grievance challenging correctness of both the lower authorities’ actionmaking Section 36(1)(iii) interest disallowance of Rs.52,66,579/-, we notice that the same is indeed a recurring issue and the CIT(A)’s order in AYs.2012-13 and 2013-14 had restored it back to the Assessing Officer for his afresh factual verification. This tribunal’s co-ordinate bench’s order dt.05-04-2018 in Revenue’s appeals ITA Nos.1155 and 1156/Hyd/2017 had affirmed the CIT(A)’s action to this effect. We therefore deem it appropriate to adopt the very course of action in the impugned assessment year as well. The assessee’s first and foremost grievance of Section 36(1)(iii) interest disallowance is restored back to the Assessing Officer to be decided in law on his findings in preceding assessment years i.e. AYs.2012-13 and 2013-14. Ordered accordingly.

4. Coming to the assessee’s remaining latter substantive ground seeking to reverse the learned lower authorities’ action invoking Section 40(a)(ii) and 40(a)(ia), business promotion expenditure and profit on sale of assets disallowances/additions (supra), we find force in the Revenue’s arguments that the corresponding 3rd to 8th substantive grounds before the CIT(A) had been given up as per para 7 of the lower appellate order. There is no pleading rebutting correctness thereof before us. We thus see no merit in assessee’s 3rd to 5th substantive grounds whereas its 6th substantive grievance regarding sale of assets is restored back to the Assessing Officer for his afresh factual verification regarding sale of assets viz-a-viz the corresponding effect on depreciation claim. Ordered accordingly.

5. This assessee’s appeal is partly allowed for statistical purposes in above terms.

Order pronounced in the open court on 1st July, 2021

 Sd/-                                                        Sd/-
 (LAXMI PRASAD SAHU)                       (S.S.GODARA)
 ACCOUNTANT MEMBER                      JUDICIAL MEMBER

Hyderabad,
Dated: 01-07-2021

Copy to :
1.K.L.R.Industries Limited, Survey No.221/1, Cherlapally Road, ECIL Post, Hyderabad.
2.The Income Tax Officer, Ward-2(1), Hyderabad.
3.CIT(Appeals)-8, Hyderabad.
4.Pr.CIT-2, Hyderabad.
5.D.R. ITAT, Hyderabad.
6.Guard File.