The Delhi bench of Income Tax Appellate Tribunal (ITAT) while directing readjudication observed that no interest expenditure should be disallowed which has not been claimed during the deposit of tax in return.
The assessee , WLD Investments Pvt. Ltd.e-filed return of income belatedly under Section 139(4) of the Act showing ‘Nil’ income.Thereafter the case was selected for scrutiny . In the course of the scrutiny assessment, the AO observed that the interest payments on which TDS deducted but not deposited before the due date under Section 139(1) of the Act is liable to be disallowed under Section 40(a)(ia) of the Act.
Accordingly the AO disallowed the 30% of the interest payments of Rs.14,53,08,907/- and a disallowance of Rs.4,35,92,672/- was carried out by the AO without appreciating the facts in prospective.
Aggrieved by the order, the assessee filed an appeal before the tribunal. However who dismissed the appeal filed by the assessee. Therefore the assessee preferred a second appeal before the tribunal.
Assesee representative ,S. Krishnan argued that Revenue has committed error firstly, that no interest expenditure has been claimed and therefore, none could have been disallowed and secondly, when no loss has been claimed, the AO has committed error in determining the assessed loss.
Therefore assessee has neither claimed expenditure on interest amount wherein tax has been deposited on time as well as on the interest amount where the tax has been deposited late, no interest expenditure could be disallowed which has not been claimed at the first instance.
Amit Katoch, the Department representative argued that assessee has filed belated return and therefore, the loss could not have been claimed for carry forward and set off in the subsequent year by operation of law. Consequently, and for this reason, the assessee has not claimed the interest expenditure.
The tribunal during the adjudication observed that “AO has assessed loss on a certain amount despite the fact that no such loss has been claimed. The AO as well as the CIT(A) has not examined this aspect of the matter. Both the Authorities have also not taken into account whether interest expenditure has been claimed on payment basis in the ensuing years”.
However, while processing the return of income, the entire amount of Rs.8,10,00,000/- was adjusted against the income tax liability, thereby, creating liability of FBT demand of Rs.73,45,724/- along with interest charged of Rs.18,38,871/- under section 115WJ of the Income Tax Act.
Therefore the two-member bench Of Pradip Kumar Kedia, (Accountant Member) and Saktijit Dey, (Vice President) set aside the first appellate order and remit the matter back to the AO for determining the issue afresh on the basis of relevant facts that may be placed by the assessee before the AO.
Accordingly the appeal of the assessee is allowed for statistical purposes.
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