- (1.) This appeal has been admitted on the following questions of law:- I. Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that Section 43B of the Income Tax Act will not be attracted where the payment of statutory liability of interest to State Finance Corporation is claimed to have been made by book adjustment and not by actual payment? II. Whether on the facts and in the circumstances of the case, the Tribunal is justified in deleting the addition of Rs. 3,98,370/- made under Section 43B of the Income Tax Act for the assessment year 1991-92? The question no. 2 is a consequential relief upon the decision on the question no. 1. Therefore, question no. 1 is only relevant which would decide the question no. 2 also. The detailed facts may not be necessary in view of the reason that facts are not in dispute. The point involved is also short. Undisputedly, the assessee was entitled to subsidy from Bihar State Financial Corporation and was also liable to pay the interest on the loan borrowed by the assessee. The assessee had credit entry with Bihar State Financial Corporation and out of that credit entry of the subsidy amount, the amount of interest has been adjusted by Bihar State Financial Corporation.
(2.) The revenue's contention is that in view of the language of Section 43B of the Act, the deduction can be allowed on the loan in case of "actual payment" of the amount mentioned under various clauses under Section 43B and for interest, the relevant clause is Clause (d) under Section 43B of the Act. According to revenue, since the assessee actually not paid the interest to Bihar State Financial Corporation and said payment was by way of adjustment, it was not entitled to the deduction under Section 43B of the Act.
(3.) The Tribunal was of the view that the effective payment of interest on the loan taken from Bihar State Financial Corporation by the assessee cannot be denied because the interests were adjusted against the subsidy and the term loan due to assessee. The Tribunal also held that instead of withdrawing the subsidy and the term loans and getting it deposited in the assessee's bank account and again making the payment either by cash or by crossed cheque or bank draft, the payment has been effected by book adjustment, therefore, there is effective payment of the interest on loan to Bihar State Financial Corporation. Hence, disallowance under Section 43B of the I.T. Act in all the three accounting years were not correct.;