IN INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I T.A. No. 1633/Mds/2016 Assessment Year :2009-10 M/s. Kallakurichi Co-operative Deputy Commissioner of Sugar Mills Limited, Vs. Income Tax, Moongilthuraipattu, Circle II, Cuddallore. Villupuram 605 702. [PAN:AAAAT3677M] (Appellant) ( Respondent) I T.A. No.1804, 1805, 1806 & 1807 Mds/2016 Assessment Year :2008-09, 2009-10, 2010-11 & 2012-13 Deputy Commissioner of Vs. M/s. Kallakurichi Co-operative Income Tax, Villupuram Circle, Sugar Mills Limited, Unit I Villupuram 605 602. Moongilthuraipattu, Villupuram 605 702. (Appellant) (Respondent) Appellant by : Shri B. Gowthaman, C.A. Respondent by : Shri Pathlavath Peerya, CIT Date of hearing : 07.09.2016 Date of Pronounce ment : 28.09.2016 O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: All appeals filed by Revenue are directed against different orders of ld. Commissioner of Income Tax (Appeals) - Puducherry, Chennai, all dated 28.03.2016 relevant to assessment years 2008-09, 2 I.T.A. Nos.1633 & 1804 to 1807/M/16 2009-10, 2010-11 and 2012-13. appeal filed by assessee is directed against order of ld. CIT(A) Puducherry, Chennai dated 28.03.2016 for assessment year 2009-10. Since all appeals pertain to same assessee and heard together are being disposed of by this common order for sake of brevity. I.T.A. No. 1633/Mds/2016 [A.Y. 2009-10] 2. only effective ground raised in appeal of assessee is that ld. CIT(A) has erred in disallowing sum of .13,45,546/- being bonus paid to employees treated as prior period expenses. 2.1 assessee is cooperative society running sugar mill and filed its return of income admitting NIL income after set off of brought forward losses from earlier years. return filed by assessee was processed under section 143(1) of Income Tax Act, 1961 [ Act in short]. Thereafter, case of assessee was selected for scrutiny under section 143(2) of Act was issued. Subsequently, notice under section 142(1) of Act was also issued. In response to above notices, AR of assessee appeared before Assessing Officer and produced books of accounts and other details as called for. After verifying details filed by assessee, assessment under section 143(3) of Act was completed by 3 I.T.A. Nos.1633 & 1804 to 1807/M/16 assessing total income of assessee at .17,55,26,212/- after making various additions. 3. assessee carried matter in appeal before ld. CIT(A) and raised two grounds with regard to interest on borrowings and prior period expenses (bonus paid). After considering submissions of assessee and facts of case, ld. CIT(A) partly allowed appeal of assessee. 4. On being aggrieved, assessee is in appeal before Tribunal and raised solitary ground with regard to confirmation of disallowance of sum of .13,45,546/- being bonus paid to employees treating it as prior period expenses. ld. Counsel for assessee has strongly contended that as per orders of Government of Tamil Nadu, assessee has paid bonus to its employees during relevant accounting year and therefore, liability was accrued in current year. Therefore, authorities below have wrongly treated same as prior period expenses. It was also submitted that actually, assessee has paid whole amount during financial year 2008-09 itself and no amount was outstanding as on 31.03.2009 and pleaded that disallowance may be deleted. 4 I.T.A. Nos.1633 & 1804 to 1807/M/16 On other hand, ld. DR supported orders of authorities below. 5. We have heard both sides, perused materials on record and gone through orders of authorities below. We have also perused copy of order of Government of Tamil Nadu dated 22.10.2008 addressed to Commissioner of Sugars, Chennai with regard to sanction of bonus and ex-gratia to employees/workers of Co- operative and Public Sector Sugar Mills for year 2007-08 payable during 2008-09. As per above orders of Government of Tamil Nadu, assessee has paid bonus to its employees during financial year 2008-09 itself and no amount was outstanding as on 31.03.2009. During course of appellate proceedings, ld. CIT(A) has observed that assessee would be entitled to actual amount of bonus paid during year and moreover, he has observed that only sum of .23,74,217/- was only claimed as bonus paid during year. Therefore, ld. CIT(A) restricted allowance to .23,74,217/- and disallowance to extent of balance sum of .13,45,546/- was sustained. ld. Counsel for assessee has submitted that disallowance sustained by ld. CIT(A) is nothing but bonus amount paid to employees and same cannot be treated as prior 5 I.T.A. Nos.1633 & 1804 to 1807/M/16 period expenses. We find force in argument of ld. Counsel for assessee. We have also perused ledger account. However, ld. DR has strongly contended that out of total bonus claim of .37,19,763/-, ld. CIT(A) has allowed amount of .23,74,217/- which was actually paid during previous year and rightly disallowed balance amount of .13,45,546/-, which was unpaid during previous year. In view of above, we direct Assessing Officer to verify as to whether sum of .13,45,546/- claimed to be bonus amount actually paid or not and if it was not paid, then it should be allowed. In pursuance to orders of Government of Tamil Nadu, if amount is actually bonus amount payable during financial year 2008-09, then amount in toto has to be allowed in terms of provisions of section 43B of Act. Thus, ground raised by assessee is partly allowed. 6. In result, appeal filed by assessee is allowed for statistical purposes. 7. only effective ground raised in appeals of Revenue for assessment years 2008-09, 2009-10, 2010-11 and 2012-13 is that ld. CIT(A) has erred in deleting disallowance made being 6 I.T.A. Nos.1633 & 1804 to 1807/M/16 interest payable on loans obtained from National Co-operative Development Corporation by applying provisions of section 43B of Act. 8. ld. DR has submitted that National Co-operative Development Corporation is financial institution as per section 4A of Companies Act, 1956 and made loan advance to assessee for specific purpose. advance was received by assessee and liability for interest has been accounted for in name of NCDC only in books of account of assessee and accordingly interest is receivable only by public financial institution i.e., NCDC. He further argued that just because advance was routed through Government of Tamil Nadu, it cannot be held that loan advance was not granted by NCDC when assessee was liable to pay interest to NCDC. Therefore, provisions of section 43B of Act clearly attract and submitted that order of ld. CIT(A) on this issue should be reversed for all assessment years. 9. Per contra, ld. Counsel for assessee has vehemently contended by referring to Government orders in G.O.Ms.No.45, Industries (MIC.1) Department, dated 27.7.2001 that actually assessee 7 I.T.A. Nos.1633 & 1804 to 1807/M/16 has taken loan from Government of Tamil Nadu and not directly from NCDC. Central Government had allowed Government of Tamil Nadu to go for open market lending for raising funds to help sugar mills in Tamil Nadu. Government of Tamil Nadu has, in fact, availed loan in light of approval granted by Government of India. After availing such open market loan from NCDC, Government of Tamil Nadu distributed amount among various sugar mills in Tamil Nadu. As per directions issued by Government of Tamil Nadu, loans have to be utilized for certain specific purposes. If assessee needs any loan from NCDC, it would have approached and obtained loan from NCDC. Therefore, submissions of ld. DR that assessee was granted loan by NCDC is not at all correct and prayed for sustaining order passed by ld. CIT(A), who has following decision of Coordinate Bench of Tribunal in I.T.A. No. 1079/Mds/2012 dated 14.12.2012. 10. We have heard both sides, perused materials on record and gone through orders of authorities below. issue for our consideration is whether interest payable by assessee on loans taken from NCDC are loans taken from Government and whether interest payable on such loans is to be disallowed under section 43B of Act. In similar facts and circumstances on identical issue, Coordinate Bench of Tribunal in case of Kallakurichi Cooperative Sugar Mills Ltd. Unit II for 8 I.T.A. Nos.1633 & 1804 to 1807/M/16 assessment year 2006-07 in I.T.A. No. 1079/Mds/2012 dated 14.12.2012, Tribunal has observed and held as under: 5. We heard both sides in detail and also perused proceedings of Director of Sugars dated 31.7.2004, in which he has referred to certain Government orders particularly, G.O.Ms.No.45, Industries (MIC.1) Department, dated 27.7.2001. On going through proceedings, we understand that assessee has taken loan from Government of Tamilnadu and not directly from NCDC. Of course, NCDC is Financial Institution as proclaimed by Government of India in terms of sec.4A of Companies Act, 1956. If assessee has taken loan directly from NCDC, case would have been covered by sec.43B. Now, in present case, Central Government had allowed Government of Tamilnadu to go for open market lending for raising funds to help sugar mills in Tamilnadu. Government of Tamilnadu has in fact availed loan in light of approval granted by Government of India. After availing such open market loan from NCDC, Government of Tamilnadu distributed amount among various sugar mills in Tamilnadu. As per directions issued by Government of Tamilnadu, loans have to be utilized for certain specific purposes. Government of Tamilnadu also allowed assessee to enjoy moratorium on repayment for period of 5 years. mills are supposed to make repayment as and when directed by State Government. At same time, assessee provided for such interest, as it is following mercantile system of accounting. privity of contract is between assessee and Government of Tamilnadu. In fact, auditors might have shown loan as availed from NCDC looking into source of source of loan. Even if it is overstatement, such observation alone should not decide exact nature of issue. As far as present case is concerned, Government of Tamilnadu is lender and assessee is borrower. Any amount payable to Government, but not actually paid, is not hit by sec.43B. Therefore, Commissioner of Income-tax (Appeals) is justified in cancelling disallowance made by Assessing Officer under sec.43B . 8. Revenue could not controvert above findings of Tribunal by filing any order of higher Court having modified or reverted above decision of Tribunal. Just because Department has preferred 9 I.T.A. Nos.1633 & 1804 to 1807/M/16 appeal before Hon ble Jurisdictional High Court, we cannot take different view. Tribunal has also followed above decision while deciding appeals in case of ACIT v. Kallakurichi Cooperative Sugar Mills Ltd. Unit II for assessment years 2005-06, 2008-09, 2009-10 and 2010-11 in I.T.A. Nos. 1952, 1953, 1954 and 1955/Mds/2013 dated 07.01.2014. Thus, respectfully following above decision of Coordinate Bench of Tribunal, we dismiss ground raised by Revenue for all assessment years. 9. In result, appeal filed by assessee in I.T.A. No. 1633/Mds/2016 is allowed for statistical purposes and appeals filed by Revenue in I.T.A. Nos. 1804 to 1807/Mds/2016 are dismissed. Order pronounced on 28th September, 2016 at Chennai. Sd/- Sd/- (A. MOHAN ALANKAMONY) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 28.09.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6 GF. M/s. Kallakurichi Co-operative Sugar Mills Limited v. Deputy Commissioner of Income-tax, Circle II, Cuddallore