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2017 (10) TMI 1523 - AT - Income TaxDisallowance u/s. 57(iii) - Disallowance of interest expense against income from other sources - addition as lending bank has discontinued providing for interest effective from lst April, 2003 and hence, there is no liability/ obligation of the appellants to pay to the bank - appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the claim of the said interest expense against income from other sources inspite of the fact that the impugned interest is not debited by the lending bank inasmuch as the appellants are contractually liable to pay the same - HELD THAT:- If the bank later on waives the interest to be paid to them by the assessee, the provisions of section 41(1) shall not be applicable but the provisions of section 59 of the Act which are similar to section 41(1) will be applicable. Since the allowability of interest expenditure are with respect to the details of interest due with the above banks, whereas the one time settlement entered by the assessee for assessment year 2005-06 is with Centurion Bank; hence, the contention of learned DR is not applicable to the facts of the case. Even though assessee has not paid the interest to the bank but as per provisions of Section 145(1), assessee has to compute its income under the head ‘Profit and Gains of business and profession’ or ‘income from other sources’ subject to provisions of sub-section (2) in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Thus, the interest expenditure need not be paid in as much as the income chargeable to tax under business income or income from other sources shall be computed in accordance with cash or mercantile basis regularly employed by the assessee. Respectfully following the decision of Tribunal in assessee’s own case [2016 (11) TMI 743 - ITAT MUMBAI] the interest claimed by assessee is to be allowed to the assessee primarily on the basis of consolidated order of the Tribunal for income-tax assessment years 208-09 and 2009-10. We direct accordingly. Disallowance of administrative expenses, depreciation against the other income being mark-to-market valuation of shares - HELD THAT:- We found that since during the year under consideration the business was not in operation and assets were not put to use, the claim of depreciation cannot be allowed. However, when the business again starts, assessee can claim depreciation on the WDV as stood in the year when business was discontinued. We direct accordingly. Addition made u/s.41(1) on account of waiver allowed by the Centurian Bank - HELD THAT:- Tribunal relying on the decision of the Supreme Court in the case of Megraj & Omers v Mst Bayabai [1969 (4) TMI 105 - SUPREME COURT] has expressed a view that in a one-time settlement (OTS) by the borrower with the lender, any repayments by the borrower shall first be adjusted towards the interest component and the balance, if any, shall be adjusted against the principal amount - we direct the AO to delete the addition made on account of waiver allowed by the Centurian Bank.
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