TMI Blog2014 (5) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... to provision of mercantile system of accounting where the statutory liability was not actually discharged - The assessee is not entitled to claim the deduction u/s 43B pertaining to the interest payable during the AY – Decided in favour of Revenue. - Income Tax Appeal No. - 102 of 2001 - - - Dated:- 15-5-2014 - Hon'ble Tarun Agarwala And Hon'ble Dr. Satish Chandra,JJ. For the Appellant : C.S.C.,R. K. Upadhya For the Respondent : Rahul Agarwal, S. D. Singh ORDER Delivered by Dr. Satish Chandra,J.) The present appeal is filed by the department under Section-260-A of the Income Tax Act against the judgment and order dated 16.01.2001, passed by the Income Tax Appellate Tribunal, Delhi in Appeal No.6408 of 1993 for the assessment year 1990-91. On 17.03.2010, the appeal is admitted by a Co-ordinate Bench on the following substantial questions of law:- (a) Whether on the facts and in the circumstances of the case the Tribunal has erred in law in allowing the deduction of Rs. 17,10,011/- on account of provision for interest as it is a fictional liability? The brief facts of the case are that the assessee is a limited company deriving the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The only ground on which the claim of the assessee for duduction was denied by the Income-tax Officer was that the assessee was disputing the liability by filing an appeal to the Supreme Court. This view of the Income-tax Officer did not find favour with the Commissioner (Appeals) and the Tribunal. The law in this regard is well-settled by the decision of the Supreme Court in Kedarnath Jute Mfd. Co. Ltd. v. CIT [1971] 82 ITR 363, that if there is actual liability in praesenti, deduction cannot be denied on the ground that the assessee is disputing the liability. Finally, he made a request to allow the appeal. On the other hand, Sri S.D. Singh, Senior Counsel assisted by Sri Rahul Agarwal, learned counsel for the assessee has justified the impugned order. He submits that the assessee has filed an appeal before the Hon'ble Supreme Court but he was unable to tell the outcome of the said case. The learned counsel further submits that the Tribunal had followed its earlier order for the previous assessment year 1986-87. For the purpose, he relied on ratio laid down in the case of Radhasoami Satsang v. C.I.T. (1992) 1 SCC 659, where it was observed that:- Each assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly paid means the amount actually paid in the coffers of the revenue and not a constructive payment. A bank guarantee furnished for grant of stay is not equivalent to payment of disputed excise duty as per the ratio laid down in case of C.I.T. Vs. Mc-Dowell Company Ltd 314 ITR 67 Supreme Court. It may be mentioned that actually paid can include a constructive payment. Deduction is allowable only on the basis of actual payment, irrespective of the method of the accounting adopted by the assessee as per the ratio laid down in the Sanghi Vs. Union of India 187 ITR 703 (Delhi); and C.I.T. Vs. Yashpal 110 Taxman 251 (Jammu). It also overrides Section-36(1) of the Act. For the convenience, Section-43B of the Income Tax Act is reproduced as under:- 43B. Certain deductions to be only on actual payment Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- .... (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a state financial corporation or a state industrial investment corporation, in accordance with the terms and conditions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable deduction of the assessee, based on the system of accounting followed, it will still be inadmissible under Section 43B if it is not paid on or before the end of the relevant previous year or at least before the date of filing of the return. Therefore, section 43B is only supplementary to section 145 of the Act and it is only an additional condition for allowance of deductions otherwise allowable under the other provisions of the Act. (Emphasis added) It may also be mentioned that Calcutta High Court in the case of Exide Industries Ltd. And another Vs. Union of India and others [2007] 292 ITR 470 held that :- The original enactment of section 43B in the Income-tax Act, 1961, was to curb unreasonable deduction on the basis of the mercantile system of accounting without discharging statutory liabilities. It was observed by the Legislature that such enactment was necessary as there had been a trend to evade statutory liabilities on the one hand and claim appropriate benefit under the Act on the other. Under clause (f) of section 43B, any sum payable by the employer to its employees as leave encashment shall be deductible only in computing the income referred to in se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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