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2021 (2) TMI 825 - AT - Income TaxDisallowance of the interest expenditure u/s 43B(d)/(e) r.w ‘Explanation 3D’ - HELD THAT:- Any sum inter alia payable by the assessee on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in Sec. 28 of that previous year in which such sum is actually paid by him. As per the ‘Explanation 3D’ it has been clarified that a deduction of any sum, inter alia being interest payable on any loan or advance from a scheduled bank shall be allowed if such interest has been actually paid and any interest which had been converted into a loan or advance shall not be deemed to have been actually paid. In our considered view, the controversy in hand had emerged from the different manner in which Sec. 43B(d)/(e) r.w ‘Explanation 3D’ had been construed by the assessee and the revenue. As observed by the A.O, as the interest debited/charged by the bank got converted into further liability wherein the existing debit balance would be further increased in the overdraft account thus, any payment of an amount towards interest would partake the character as that of repayment of the existing amount of the principal loan and not the interest claimed by the assessee. We find that the aforesaid issue had been looked into by the Hon’ble High Court of Madras in CIT Vs. Prakash Food & Feed Mills Pvt. Ltd. [2014 (11) TMI 1232 - MADRAS HIGH COURT].wherein not finding favour with the view taken by the A.O had observed, that as the interest amount paid by the assessee through overdraft/cash credit account was not similar to loan accounts, thus, the ‘Explanation 3C’ or ‘Explanation 3D’ to Sec. 43B would not be applicable insofar the interest amount had been actually paid by the assessee through overdraft/cash credit account and the same has not been converted into loan or advance, as the case may be. Backed by its aforesaid observation the Hon’ble High Court had dismissed the appeal of the revenue. We find that following the aforesaid judgment of the Hon’ble High Court of Madras, a coordinate bench of the Tribunal i.e ITAT, Bench ‘I’, Mumbai in the assessee’s own case for A.Y: 2011-12 [2016 (12) TMI 1839 - ITAT MUMBAI] had vacated a similar disallowance of interest paid by the assessee on its overdraft/cash credit account under Sec. 43B(d)/(e) r.w ‘Explanation 3D’ to Sec. 43B - Decided against revenue.
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