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2023 (8) TMI 426 - AT - Income TaxAddition on interest expenditure - interest paid @ 9% is not allowable in view of the provisions contained in the Explanation (1) to Sec. 37(1) of the Act - scope of principle of “consistency” - CIT(A) deleted the addition as interest paid pursuant to Court decree was not towards penalty for infraction of any law, but was a purely commercial arrangement under a civil suit, which was filed in order to protect the business interests of the assessee - Whether the same was penal in nature and hence not allowable u/s 37? - HELD THAT:- The assessee had entered into “compromise agreement” with Nakoda developers towards re-purchase of land sold to the said party and this “compromise agreement” was done purely to protect the business interests of the assessee. The flow of transactions was on account of the business exigencies of the assessee company and the aforesaid arrangements and the consequential “compromise agreement” were done pursuant to the business exigencies of the assessee’s business. We are of the considered view that CIT(Appeals) has correctly observed that the payment of interest was not made towards any infraction of law and therefore, the same is allowable u/s 37 of the Act. Though the principal of Res Judicata is not applicable in income tax proceedings, but, looking into the instant facts, when on identical facts similar disallowance has not been made in any of the earlier or later years by the Department, following the principle of “consistency” as laid down in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] the Department should not disallow interest payment for this year as well. We are in agreement with the contentions put forth by assessee that when on identical facts, the Department has not made any disallowance in respect of interest payments, which the assessee has been consistently paying over a period of 10 years i.e. both in the past years as well as for the future assessment years, then the Department is precluded from making disallowance on the same set of facts in the impugned year under consideration. Appeal of the Department is dismissed.
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