The Tax Publishers2020 TaxPub(DT) 5467 (Ctk-Trib)


Section 37(1)

Interest on disputed govt. duty, being electricity and water charges, was allowable to assessee as allowed by Tribunal in earlier years in assessee's own case, it was not contingent liability.

Business expenditure - Ascertained liability - Interest on disputed Govt. duty electricity Duty and water charge -

AO completed the assessment under section 143(3) originally on 30-12-2011 determining the total income after making certain additions/disallowances. Subsequently, the Commissioner, cancelled the assessment order with a direction to pass fresh assessment order. Thereafter, the AO passed the assessment order under section 143(3)/263 making the same additions as were made in the cancelled assessment order. CIT(A) after considering the submissions of assessee and findings of AO had partly allowed the appeal of assessee. AO in the assessment order stated that the payments of interest on disputed of electricity duty and water charges were not ascertained liabilities, but were unascertained liabilities which were not allowable as business expenditure. The AO further noted that in the earlier years the issue was pending before the higher appellate stage and the matter had not yet been finalised, therefore, disallowed interest on disputed Govt. duty and added to the total income of the assessee. In appeal, CIT(A) observed that the amount was a provision and had been calculated on the basis of the enhanced electricity duty which itself was in dispute. Since the amount had not been arisen out of any demand raised by any authority and was in the nature of provisions, therefore, CIT(A) confirmed the disallowance made by the AO. The similar issue had been decided by the coordinate Bench of the Tribunal in assessee's own case for the assessment year 2014-15 in ITA Nos. 106 & 110/CTK/2018, vide order, dated 23-9-2019, wherein the Tribunal relying on its earlier Order, dated 29-6-2018 passed in ITA No. 211/CTK/2017 has allowed the issue in favour of assessee. Held: The reasoning given by AO for disallowing interest on non/delayed payment of water charges were that it was a contingent liability. Tribunal in assessee's own case in earlier years had allowed this claim under similar circumstances and held that interest on unpaid electricity duty and water charges is fully allowable under section 37 and provisions of section 44A for disallowance was not attracted. Following the observations of the Tribunal, in earlier order the AO was directed to delete the disallowance made on account of interest on disputed govt. duty electricity duty and water charges.

Followed:ITA Nos. 106 & 110/CTK/2018, vide Order, dated 23-9-2019.


FAVOUR : In assessee's favour.

A.Y. : 2009-10, 2015-16 & 2016-2017


Section 37(1)


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