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2018 (9) TMI 773 - AT - Income TaxRevision u/s 263 - CIT found fault with the action of the AO in allowing interest as interest on the loan, the assessee had taken from the Govt. of West Bengal - Held that:- At the first instance itself note that the loan was sanctioned by the West Bengal Government and as per the terms and conditions of the loan sanctioned it was provided that the G.O. will be issued later on prescribing the terms and conditions of the loan sanctioned. In the light of the G.O. on the subject matter “loans and advances of the State Govt. & interest rates and other term and conditions for the year 2011-12” the interest on the borrowed funds cannot be termed as a contingent liability. However, we note that though the assessee had debited ₹ 537.34 lacs i.e. 6.25% of the borrowed funds as interest expenditure and claimed deduction of the same. The said sum was not paid before the due date of filing of the return of income. So, as per section 43B of the Act, the sum of interest not paid cannot be allowed as expenditure in this A.Y. And since the AO has accepted the return of income of the assessee without looking into the fact that the assessee has not remitted the interest to the lender, so as per section 43B of the Act the expenditure claimed on interest incurred on the loan taken, could not have been allowed and, therefore, the order of the AO is erroneous as well as prejudicial to the interest of the revenue. We uphold CIT’s action in setting aside the order of the AO and directing him to reassess the assessment and disallow interest is in order - Decided against assessee.
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