TaxTMI 
TaxTMI 
2014 (5) TMI 592
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....the following two, as submitted by the learned counsel, would be sufficient to cover the controversy: "1. Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in upholding the decision of CIT (A) in allowing the interest of Rs.1,72,78,000/- of earlier years in the A.Y. 2008-09 on the basis of a supplementary agreement without considering that liability for such payment flowed from the original agreement with NEL and as per the system of accounting followed by the assessee was payable in years in which it accrued. 3. Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in upholding the decision of CIT(A) in ....
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....h had been converted into a term loan from Niskalp, which had resulted in understating the loss by the same amount. The issue as regards the payment of interest by the assessee to Niskalp was eventually resolved by a supplementary agreement dated 12 April 2007. Under the supplementary agreement, the rate of interest was reduced from 12% to 6% on a reducing balance method with effect from 1 April 2000. The relevant part of the agreement which has been extracted in the order of the Tribunal reads as follows: "G. In or about March 2007, the Borrower approached the Lender and requested the Lender to grant additional concessions and reliefs in respect of the amounts payable in respect of the Loan Agreement. Accordingly, the Borrower has re....
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....est in Schedule 17 to the profit and loss account. The Assessing Officer made a disallowance of a claim of interest of 1.72 crores on the ground that the assessee had followed the mercantile system of accounting and hence, the liability in terms of payment of interest could be quantified and made in the corresponding assessment year. The CIT (A) deleted the disallowance observing that the liability to pay interest to Niskalp was not a statutory liability but a contractual liability; there was a serious disagreement between the assessee and Niskalp regarding the rate of interest and to resolve it, a meeting had been held on 10 May 2002 by the Directors of the Company and the Management of the Tata Group. This impasse continued till 2007 when....
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.... the order of CIT(A) and we find that he has adjudicated the issue in right perspective following the judicial pronouncements rendered on the subject. Since we find no infirmity in his order, we confirm the order of CIT(A)." The contention of learned counsel appearing on behalf of the Revenue is that the liability of the assessee, which had followed the mercantile system accounting, to pay interest had arisen under the agreement dated 30 March 2000. Both the CIT(A) and the Tribunal have noted that initially an agreement was entered on 30 March 2000 under which the outstanding dues of the assessee to TML in the amount of Rs.4.80 crores was squared off by the grant of a loan from Niskalp to the assessee for that purpose. However, the is....
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....ase of the department any further. In the present case, it was not a statutory liability of the assessee but a contractual dispute with the assessee under the agreement dated 30 March 2000 which eventually was resolved and the liability was crystallized only when the subsequent agreement dated 12 April 2007 was made. Consequently, there is no reason to interfere with the order of the CIT(A) and of the Tribunal. As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides i....