The Income Tax Appellate Tribunal ( ITAT ), Pune Bench, has recently, in an appeal filed before it, held that interest paid on customs duty is deductible u/s 43Bof the Income Tax Act, 1961.
The aforesaid observation was made by the Pune ITAT, when an appeal was preferred before it by the appellant, Enkei Wheels India Ltd., as against the order of the Commissioner of Income Tax (Appeals), Pune, dated 25.03.2019,for the A.Y. 2013-14, emanating from the order of Assessing Officer (AO) passed under section 143(3) of the Income Tax Act, 1961, dated 23/12/2016.
The issues involved in the assessee’s appeal being the questions as to whether the CIT(A), has erred in holding that interest on delayed payment on custom duty was not covered by the provisions of section 43 B of the Income Tax Act and that hence, the disallowance made by the A.O. was justified, and also as to whether the CIT(A), has erred inin not appreciating that the interest on delayed payment on custom duty was covered by the provisions of section 43B and therefore, the assessee was justified in claiming the said amount as a deduction in the year under consideration, the brief facts of the case were that during the assessment proceedings, it was so observed by the the Assessing Officer(AO) that the assessee had paid Rs.3,37,96,354/- on account payment of interest on custom duty on various dates.
Subsequently, the assessee claimed the said amount as deduction allowable under section 43B of the Income Tax Act, as being paid on or before due date of filing of return of income for the relevant assessment year, but the AO disallowed the said amount stating that it is not allowable deduction under section 43B of the Act.
Aggrieved by the same, the assessee went in appeal before the CIT(A) , who upheld the disallowance, leaving the assessee with the only option of preferring the instant appeal before the Pune ITAT.
With Shri Nikhil S Pathak, the AR for the assessee, by relying upon the decisions in the cases of CIT v/s Andhra Sugars Ltd as well as CIT Vs. UP Distillary, and submitting that it is an allowable deduction u/s 43B of the Income Tax Act, Shri Ramnath P Murkunde, the DR, on the other hand, relied on the orders of the Lower Authorities.
Hearing the opposing contentions of either sides and perusing the materials available on record, the Bench of Pune ITAT consisting of the S.S Godara, the Judicial Member, and Dr. Dipak P. Ripote, the Accountant Member, observed:
“The Hon’ble High Court of Delhi in the case of Shankar Trading Co P Ltd Vs CIT, has held that it is an allowable deduction u/s43B of the Act.The facts of the Shankar trading Co P. Ltd (supra) and that of the assessee are identical. In the case of the assessee, the assessee has paid Interest on Customs Duty. In the case of the assessee the Interest on Customs Duty is automatic. Hence, the decision of Hon’ble Delhi High Court is applicable in the case of the assessee.”
Adding to which the Bench further observed:
“The Hon’ble High Court of Telangana and Andhra Pradesh has held in the case of CIT Vs. Andhra Sugar Ltd, that the provisions of section 43B are applicable on Interest paid on Purchase duty. Similarly, the ratio laid down by Hon’ble High Court of Telangana and Andhra Pradesh is applicable in the case of the assessee.”
Thus, allowing the assessee’s the Pune ITAT held:
“Therefore, for all the reasons discussed above, we are of the considered opinion that the Interest paid by the assessee of Rs.3,37396,354/- on Customs Duty is allowable as deduction u/s 43B of the Act. In the result, appeal of the assessee is allowed.”
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