R.C. Sharma, A.M. - (1.) THIS is an appeal filed by the revenue against the order of Commissioner (Appeals), dated 29 -3 -1996, for the assessment year 1989 -90.
(2.) THE following three grounds of appeal have been raised by the revenue : 1. That, on facts and circumstances of the case, the learned Commissioner (Appeals) erred in law in allowings. 1,26,79,130 under section 43B as the same was not paid within due date. 2. That, on facts and circumstances of the case, the learned Commissioner (Appeals) in giving this relief ignored the fact that as on 31 -3 -1989, 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 Commissioner (Appeals) be set aside and the order of the assessing officer 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 section 143(1)(a), the assessing officer 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 to the assessment year 1989 -90 extended for 23 months form 1 -5 -1987, to 31 -3 -1989. The assessee -company had filed along with the return two sets of tax audit report respectively for the period 1 -5 -1987, to 30 -4 -1988, and 1 -5 -1988, to 31 -3 -1989. The disallowances of Rs. 62,68,542 relates to the period 1 -5 -1987, to 30 -4 -1988. But during the period 1 -5 -1988, to 30 -3 -1989, the assessee has debited Rs. 1,26,79,130 in the profit and loss account as the interest against the loan from the financial institutions and the same was not paid before 31 -3 -1989. The assessee also did not pay this interest even before the filing of the Income Tax return. Accordingly, this amount of Rs. 1,26,79,130 was reduced from the returned loss in arriving at the adjusted total income/loss under section 143(1)(a). The mistake was apparent from the record and proceeding under section 154(1)(b) was initiated. Notice was issued and served on the assessee seeking his contention in respect of the contemplated rectification of the intimation under section 143(1)(a). In response to the above notice the assessee submitted that the loans from the financial institutions namely, ICICI were taken before. 1 -5 -1987. The commercial production of the assessee started from 1 -11 -1987. The interest pay able uptill 31 -10 -1987 was capitalised by the company. Out of the interest payable for the period 1 -11 -1987, to 30 -4 -1988, the assessee could not pay Rs. 62,63,542 due to financial stringency. Out of the total interest payable of Rs. 1,61,67,796 for the period 1 -5 -1988, to 31 -3 -1989, the assessee -company capitalised Rs. 34,88,666 and debited Rs 1,26,79,130 in the profit and loss account. This amount was also not paid due to shortage of fund. The assessee -company however, preferred the request before 31 -3 -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 20 -6 -1989, subject to the consideration that the deferred interest will be repayable in equal quarterly instalments commencing from 15 -5 -1990. The said order deferring the payment of interest was issued on 12 -7 -1989, i.e., after the completion of the accounting period. It has been submitted on behalf of the assessee that the credit for the liabilities as enumerated in section 43B of the Income Tax Act should be allowed if the necessary payment is made before filing of the return and as per the clause (d) of section 43B whether any sum is payable by this assessee as interest on any loan or borrowing from any public financial institution should be determined in accordance with the terms and conditions of the agreement governing such loans or borrowing. In view of the above -mentioned order dated 12 -7 -1989, of ICICI Ltd. no interest was payable by the assessee. Hence, the returned loss should not be reduced by Rs. 1,26,79,130 for non -payment of interest.;