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2011 (6) TMI 14 - HC - Income TaxDisallowance - Liability to pay interest on damages awarded for breach of agreement - The appellant is a registered society primarily formed with the object to market agriculture produce for the benefit of producers/farmers - The appellant entered into contract with Alimenta for export of 5,000 MT HPS groundnut during the period February to April, 1980 subject to certain terms and conditions - On account of ban imposed by Government of India, the assessee was prohibited from exporting balance quantity of HPS groundnuts - Alimenta initiated arbitration proceedings, wherein the assessee was directed to make payment of US$ 46,81,000 as damages with interest at the rate of 10.5 per cent from 13-2-1981 to the date of the award i.e., 15-11-1989. Held that: the liability on account of interest was to be deductable only when it gets crystallized into a certain liability and that took place only on this court passing a decree and awarding interest after the date of the award till the date of realization - Thus, the liability did not crystallize in the three assessment years 1996-97, 1997-98 and 1998-99, but only came to be crystallized in the year 2000-2001, when this court passed decree on 28-1-2000 and, therefore, the assessee could not claim deduction for the same in the assessment years 1996-97, 1997-98 and 1998-99 - Thus, answer question in affirmative in favour of the revenue and against the assessee and consequently dismissed the appeal.
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