1991 (5) TMI 94 - AT - Income Tax

Court rules against disallowance of interest under s. 43B for AY 1989-90, emphasizing statutory timing.

The court upheld the CIT(A)'s ruling that the disallowance of interest payable under s. 43B for the assessment year 1989-90 was incorrect. The judgment ... - Issues:Interpretation and scope of provision of s. 43B of the IT Act, 1961 for asst. yr. 1989-90.Analysis:The Revenue's appeal questioned the deletion of an addition of Rs. 46,284 under s. 43B regarding interest payable to a financial corporation. The CIT(A) justified the deletion based on the applicability of the provision from 1st April, 1991. The dispute centered around the timing of the amendment and whether the appeal had a cause of action.The Revenue contended that the appeal was valid, emphasizing the enactment of sub-s. (D) of s. 43B in 1988. However, the respondent argued that the amendment in 1990 specifically addressed interest payable on loans from State Financial Corporations. The crux of the matter was the timing of statutory provisions and their application to the case at hand.The judgment delved into the provisions of s. 43B and its subsequent amendments. The original provision allowed deductions only on actual payment, while the 1990 amendment extended this to include interest on loans from State Financial Corporations. The court highlighted the significance of the legislative changes in determining the allowance of interest payments.The court also examined the definition of 'Public Financial Institutions' under s. 4A of the Companies Act, emphasizing the institutions falling under this category. The evolution of the definition and its impact on the interpretation of s. 43B were crucial in understanding the applicability of the provisions to the case.Ultimately, the court concluded that the provisions applicable for the assessment year 1991-92 could not be used to justify disallowance of interest payable in the previous year. The decision upheld the CIT(A)'s ruling that the disallowance by the Assessing Officer was incorrect, leading to the dismissal of the Revenue's appeal.