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COMMISSIONER OF INCOME TAX CAL WEST BENGAL-IV Versus M/s. HANUMAN SUGAR INDUSTRIES LTD.

2015 (8) TMI 928 - CALCUTTA HIGH COURT

Question of libility - accrual of interest - Whether the assessee can be permitted to claim deduction for interest which was neither paid nor shown to have been incurred in the books of accounts ? - Held that:- The assessee before us has neither paid the liability nor has admitted the liability in its books of accounts. The assessee on the top of that has disputed the liability as indicated above. Therefore, the judgment in the case of Indian Metals & Carbide Ltd. [1991 (12) TMI 31 - ORISSA High .....

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1990-91 and 1991-92. The learned Tribunal held, inter alia, as follows : When we look at the facts of the case, we find that the department has raised rather a very lame excuse in disallowing the claim of the assessee towards interest payment on the ground that the assessee did not debit the interest amounts in its accounts for the respective years upto the assessment year 1991- 92. As has been discussed by the CIT(A) in his appellate order for the assessment year 1991-92, the book entries are .....

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1989-90 seem to have been guided by the sole factor that on account of the suit filed by the Bank, the liability of the assessee towards interest payment should be considered to be subjudice and not actually accrued. As has been discussed by us above, the Third Member, in his order for the assessment year 1986-87, has clearly found out that the suit under consideration related merely to recovery of dues of the bank and had nothing to do with the liability of the assessee for payment of interest .....

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hat the claims of interest to the Bank be allowed irrespective of the fact that the amounts in respect thereof were not actually debited to the accounts of the assessee. Mr. Saraf, learned Advocate appearing for the appellant revenue submitted that the real question to be considered in the appeal is whether the assessee can be allowed deduction on account of interest arising out of a liability which the assessee himself has disputed. He drew our attention to page 2 of the impugned order wherein .....

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clear to us. But it appears that the assessee has made some payments on account of interest which has also been reflected in the books of accounts for which deduction has duly been allowed. The question arose whether the assessee can be permitted to claim deduction for an amount which has neither been paid nor has been shown to have been accrued in the books of accounts. It is this question which was answered by the learned Tribunal in the affirmative and in favour of the assessee on the basis .....

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years. Therefore, the question of liability has to be reframed as follows :- Whether the assessee can be permitted to claim deduction for interest which was neither paid nor shown to have been incurred in the books of accounts ? Mr. Bhowmik, learned Advocate appearing for the assessee drew our attention to the judgment in the case of Kedarnath Jute Mfg. Co. Ltd. versus Commissioner of Income Tax (Central), Calcutta reported in 1971(82) ITR 363 which was a judgment with respect to statutory liabi .....

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there can be no basis for any liability on account of interest. The reasoning adopted by the learned Tribunal is evidently and demonstrably fallacious. Mr. Bhowmik drew out attention to a judgment in the case of Commissioner of Income Tax versus Indian Metals and Carbide Ltd. reported in 1992 (198) ITR 444 wherein the following view was taken : On consideration of the rival submissions, we find that the approach of the Tribunal was correct. Admittedly, the assessee follows the mercantile method .....

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he accounting year or when the accounts were mutually settled. Such accrual is not dependent upon the passing of a resolution. It is not the case of the Revenue that there was any agreement not to charge interest. As indicated above, the quantification of the amount payable was done by the resolution. Liability to pay and quantification are different aspects, though having a live link for the purpose of assessment of income. The method of accounting being mercantile, belated entry in the books o .....

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