TMI Blog2001 (8) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... 89, the liability for payment to the aforesaid institution was existing and, therefore, 43B was applicable in this case. 3. On facts and circumstances of the case, the order of the learned CIT(A) be set aside and the order of the AO be restored." 3. The facts of the case, in brief, are that the return of income was filed disclosing loss of Rs. 16,47,24,891. While processing the return under s. 143(1)(a), the AO made an addition of Rs. 62,68,542 on the ground that the evidence of payment of interest on loans from public financial institutions was not filed. An additional tax of Rs. 6,26,864 was also imposed for this disallowance. Subsequently on verification of the record it revealed that the accounting period, of the assessee relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial stringency. Out of the total interest payable of Rs. 1,61,67,796 for the period 1st May, 1988, to 31st March, 1989, the assessee-company capitalised Rs. 34,88,666 and debited Rs 1,26,79,130 in the P L a/c. This amount was also not paid due to shortage of fund. The assessee-company however, preferred the request before 31st March, 1989, to the financial institutions to defer the payment of the concerned interest. The ICICI Ltd. agreed to defer the collection of interest and other charges falling due upto 20th June, 1989, subject to the consideration that the deferred interest will be repayable in equal quarterly instalments commencing from 15th May, 1990. The said order deferring the payment of interest was issued on 12th July, 1989, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) involves a discussion and debates as such, it was not amenable to resolutions through an order of rectification. Against this order of CIT(A) deleting the disallowance under s. 43B(d) the Revenue is before us in second appeal. 7. It was vehemently argued by the learned authorised representative that Expln. 2 of s. 43B defines "any sum payable" for the purpose of cl. (a) of s. 43B to mean "a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law". There is no Explanation for cl. (d). Thus, "any sum payable" has to be understood for the purpose of cl. (d) in purely commercial and accountancy way. Payability implies a right on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking further inquiry into the terms and conditions of that particular clause. 9.1. Accrual of liability and payability of such liability are two different events. The accrual of liability normally precede in point of time the discharge of such liability. The crux of s. 43B is that deduction is to be allowed on the basis of discharge of liability by way of payment and not on the basis of its accrual. The Expln. 2 to s. 43B which has the effect of synchronising the accrual of liability with payability of such liability is confined to only cl. (a) of s. 43B which deals with payment of tax, duty, cess or fees, and not to cl. (d) which deals with payability of interest on loans from any public financial institutions. Thus, it is only in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to pay the interest in terms of deferment allowed by ICICI, thereby modifying the terms and conditions of its loan agreement 9.2. Thus, on the facts and circumstances of the case, we are of the considered opinion that, without any material on this aspect of payability of interest dues, the AO was not entitled in invoke the provisions of s. 43B(d) to form part of prima facie adjustment meriting disallowance of deductions, without having regard to the terms and conditions of the loan agreement deferring the payability of interest. On the other hand, we can safely conclude that in view of clear noting in Annexure V of Form 3CD, column 7, regarding fact of deferment of interest, the AO should have allowed the interest debited to P L a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
