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TMI Blog2023 (5) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal] has been admitted to consider the following question of law: Whether in the facts and circumstances of the case, the Tribunal has erred in not appreciating that the appellant has neither filed its return of income nor was any assessment done in the case of the appellant and thus interest was not claimed as deduction and therefore, provisions of Section 41(1) of the Act are not applicable for waiver of such interest? 2. Heard Shri.Narendra Jain, learned Advocate for the Assessee and Shri. K.V. Aravind, learned Senior Standing Counsel for the Revenue. 3. Briefly stated the facts of the case are, assessee is a co-operative sugar factory. It stopped its operation in the year 2004 and it is under the control of Liquidator. It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has neither filed its return of income nor made an assessment and thus interest was not claimed as deduction and therefore, provisions of Section 41(1) of the Act are not applicable for waiver of interest; * Assessee claimed Rs.6,23,97,844/- towards interest waived by various banks as one-time settlement on the ground that interest expense was not claimed as deduction in respective years; * the return of income was not filed for the earlier years. Therefore, the interest expenditure was not claimed as deduction. Accordingly, interest waiver of Rs 6,23,97,844/- is not taxable under Section 41(1) of the Act; * the ITAT adopted a via-media solution and directed that statement of total income should be prepared for every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has not filed its return from A.Y. 2003-04 onwards. As per mercantile system of accounting, assessee had been accounting for interest expenses every year in its books of accounts showing it as payable. 11. Shri. Jain's argument in sum and substance is, assessee has not filed its return of income after A.Y. 2003-04. Therefore, the interest expenditure was not claimed as deduction. Accordingly, interest waiver of Rs 6,23,97,844/- is not taxable under Section 41(1) of the Act. 12. Section 41(1) of the Act reads as follows: 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not filed the returns for the claim for the earlier years and thus no claim has been made by filing returns of income. 14. Shri. Jain is right in his submission that Section 41(1) of the Act shall be applicable only when allowance is made in any assessment or reassessment for any year. In the present case, no assessment or reassessment has been made for any A.Ys. Therefore, no allowance or deductions are claimed for any A.Ys. 15. We have also perused the authority relied upon by assessee. In Rayala Corporation, the High Court of Madras has held as follows: "14. As far as the present case is concerned, in the context of Section 139(9) of the Act, with the return filed treated as non est in the eye of law, we hold that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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