9911796707
TMI Blog2016 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3,67,18,706 made by the CIT u/s.263 of the IT Act, 1961 for A.Y. 200203, when the contractual liability has been finally settled between the Assessee and the ONGC in the financial year 200203 relevant to A.Y.200304?" 2. Brief facts are as under : The respondent - assessee is a company registered under the Companies Act. For the assessment year 20022003 the assessee had filed its return of income which was taken in scrutiny by Assessing Officer. The Assessing Officer passed order of assessment on 28.5.2005 determining total loss of the assessee at Rs. 2.63 crores (round about). 3. In the return assessee had claimed deduction of Rs. 3.67 crores (round about) towards interest liability payable to ONGC. According to the assessee, regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ONGC for a fair settlement on the question of interest. Based on such negotiations the ONGC had under a letter dated 17.4.2002 and made a conditional offer of payment of simple interest instead of compound interest, provided the entire liability is discharged in one single installment within 60 days from the date of acceptance of the offer. The Board of Directors of the Company had accepted such offer on 17.7.2002. The liability of interest of Rs. 3.67 crores was work out as simple interest and was relatable to the judgment of Supreme Court dated 26.7.2001. The Commissioner, however, observed that the interest payable to ONGC was not a statutory liability and the same can be stated to have crystallized only in April, 2002 and cannot be sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of Directors of the Company accepted in July, 2002. Till then the liability was merely a contingent liability. Since such liability was not crystallized during the previous year relevant to the assessment year in question, the CIT correctly disallowed the same and Tribunal committed an error in reversing such a decision. 7. On the other hand, learned counsel Shri Bandish Soparkar for the assessee opposed the appeal contending that the liability of assessee to pay interest was decided by the Supreme Court in the judgment dated 26.7.2001. The assessee had computed simple interest and therefore debited sum of Rs. 3.67 crores in the profit and loss account under such liability. This amount the assessing officer had correctly allowed. 8. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ONGC to recover the dues with interest. Significantly the Supreme Court has used the words "interest as claimed by ONGC". Such claim arose at the rate specified in clause (5) of the agreement between the parties. Thus by virtue of this judgment the liability of the assessee to pay interest got crystallized. Till this judgment was rendered on 26.7.2001, there was neither any statutory liability to pay interest nor any direction from the Supreme Court. In fact, in the earlier round of litigation the Supreme Court gave no direction for charging interest on the delayed payments. 10. On perusal of the judgment of the Supreme Court dated 26.7.2001, it appears that the interest claim raised by the ONGC in its entirety was accepted by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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