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2016 (9) TMI 157 - AT - Income TaxDisallowance of whole of finance charges - accrual of incremental liability - assessee is stated to be an Investment Company investing in shares and securities - Held that:- In the present case, the assessee by virtue of assignment agreement has received certain amount which is to be replenished and repaid by higher sum computed by applying Net Present Value method at a discounting factor of 10%. The corresponding finance costs debited to Profit & Loss Account during the year represents incremental increase in the liability with the efflux of time where the liability gets accrued as it inches towards maturity. Thus, it is manifest that the incremental liability has accrued to the assessee in presenti with the efflux of time notwithstanding the fact that increase in the liability is required to be actually discharged on a future date. The gradual increase liability is dependent on the time horizon that has elapsed and therefore not an uncertain event by any stretch of imagination. The Assessing Officer has disallowed the deduction for the liability on the ground that sum will have to be incurred and accordingly in his view the liability has not accrued. We do not find any rationale for holding such view. As noted, the obligation for repayment of enhanced liability corresponding to the financial charges has crystallized with the efflux of time. Thus, the facts of the case clearly indicates that enhanced liability and consequential differential costs i.e. finance charges is accrued indeed. In our considered view, the liability has definitely accrued in presenti against future outflow of resources which obligation in the present case can be determined with great reliability. Therefore, we find considerable merit in the arguments propounded on behalf of the assessee. - Decided in favour of assessee
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