JAWAHAR LAL GUPTA, J. - (1.) THE Punjab Agro Industries Corporation Ltd., Chandigarh filed its income tax return for the year 1988 -89. It showed a loss of Rs. 69,34,140. The AO made certain additions. One of these related to an amount of Rs. 24,67,864, which had been written off by the assessee. Aggrieved by the order, the assessee filed an appeal. It was dismissed by the CIT(A) vide order dt. 3rd March, 1992. The assessee filed a second appeal before the Tribunal. Vide order dt. 29th June, 2000, the appeal was accepted. Aggrieved by the order of the Tribunal, the Revenue has filed the present appeal under S. 260A of the IT Act, 1961. It maintains that the following question of law arises for consideration of this Court : "Whether, on the facts and in the circumstances of the case Hon'ble Tribunal is right in law in allowing claim of the assessee as interest receivable from sister concern and written off as irrecoverable being a sick unit without exhausting all efforts ?"
(2.) WE have heard Mr. Sawhney, learned counsel for the Revenue. He contends that in the circumstances of the case, the Tribunal has erred in allowing the claim of the assessee. Is it so ? A perusal of the order passed by the Tribunal shows that the respondent/assessee had promoted a unit, viz. M/s Agro Foods Punjab Ltd. in collaboration with M/s Voltas Ltd. This unit had been set up to manufacture juice, concentrates tomato paste, etc. It had suffered huge losses. A rehabilitation plant was prepared by the promoters of the company and the other financial institutions. The assessee had agreed to waive off interest on loans for the period from the year 1982 -83 to 1985 -86. This was done despite the fact that an amount of Rs. 24,64,888 had been credited to the P&L a/c of the assessee during the earlier years and had been offered for levy of tax. Still further, the other collaborator, viz., M/s Voltas Ltd. had also advanced loan to the tune of Rs. 67 lacs to the company. It had given additional advances of Rs. 51 lacs. It had not debited any interest to the account of the company for the earlier years. As a result of the revival plan, the assessee had agreed to waive off interest amounting to Rs. 24,64,888. Having waived the interest, the assessee had claimed a deduction of Rs. 24,64,888 during the asst. year 1988 -89.
(3.) ON consideration of the matter, the Tribunal has found that if the assessee had not waived off the interest, it "could have lost entire share capital of Rs. 48 lacs and principal amount of Rs. 67 lacs". On this basis, it has come to a firm finding of fact that the decision to "waive off the interest was taken by the assessee to safeguard its share capital of Rs. 48 lacs and loan of Rs. 67 lacs, for which equal contribution was made by the assessee's collaborators." On this basis the deduction was allowed.;