Bank Interest not Claimed as Deduction in P & L Account and Showing as Pre-Operative Expenses, No Disallowance u/s 43B: ITAT [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal has held that no disallowance u/s 43B, since bank interest not claimed as deduction in profit and loss account and showing as pre-operative expenses.

The assessee, Shri Laxmipat Surana, is an individual and engaged in the business of property developer. The assessee filed return of declaring total income Nil. On scrutiny assessment proceedings AO observed that bank interest of Rs.3,55,54,116/- was not paid before the due date of filing of return of income. Accordingly, the same was disallowed u/s. 43B of the Act.

The CIT(A) allowed the appeal filed by the assessee against the order of AO. Aggrieved, revenue filed appeal against deletion of disallowance u/s. 43B of the Act for unpaid Bank interest amounting to Rs.3,55,54,116/-.

Mr. Biswanath Das, counsel for the revenue submitted that the amount of interest on secured loans of Rs.3,55,54,116/- was not paid by the assessee during the FY 2013-14 and was even not paid before the due date of filing of the return of income. Therefore, the same is hit by provisions of section 43B of the Act and the AO has rightly made the said disallowance.

Mr. Anil Kochar, counsel for the assessee submitted that out of the total bank interest payable at Rs.3,55,54,116/-, which was not paid by the assessee, only a sum of Rs. 54,07,493/- has been claimed by the assessee in the P & L account and remaining amount of Rs. 3,01,46,623/- has been transferred to pre-operative expenses and shown in the asset side of the balance sheet and, therefore, disallowance u/s. 43B of the Act cannot exceed Rs.54,07,493/-.

The Coram of Mr. Manish Borad, Accountant Member and Mr. Sonjoy Sarma, Judicial Member has held that “we find that so far as interest of Rs.54,07,493/- is concerned undisputedly since the same has been claimed in the P & L account, but not paid by the assessee during the financial year 2013-14 and even not before the due date of filing of return u/s. 139(1) of the Act, the same deserves to be disallowed u/s. 43B of the Act and thus, the disallowance to this extent at Rs.54,07,413/- is confirmed. But, for the remaining amount since the assessee is not claiming deduction in the P & L account and showing it as pre-operative expenses, we confirm the finding of CIT(A) deleting the disallowance”.

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