2015 (3) TMI 1182

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.... 2. The facts of the case are that the assessee-company, in the business of manufacture of insulation panels and distribution of ice cream, returned its income for the year on 01.12.2003 at a loss of Rs. 374.48 lacs. The assessee was during the course of assessment proceedings called upon to, i.e., vide notice u/s.142(1) dated 27.09.2005, justify its claim for interest, made in the sum of Rs. 2,73,95,100/-, specifically requiring the details of the payments made, in-as-much as interest to bank is among the sums specified in section 43B, so that its deduction is subject to payment. The assessee, in response, filed a revised computation of income on 09.02.2006, disallowing its interest claim afore-said. It was further explained that as its r....

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....at its allowance alone would be subject to payment. The substitution of the words 'term loan' by the words 'loans or advances' in section 43B(e) was done only by Finance Act, 2003 w.e.f. 01.04.2004, so that it would impact only assessments A.Y. 2004-05 onwards. The A.O., in fact, ought to have factored the same and made only a proportionate disallowance of interest, i.e., rather than for the entire amount of Rs. 273.95 lacs, making a suggestive calculation based on the balance outstanding in the two accounts, i.e., term loan and cash credit, by applying the average interest rate, determined at 19.10% p.a., which it contended was in fact incumbent on the A.O. to do in view of the Board's Circular No. 14-XL-35 dated 11.04.1955. Further on, in....

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....rued and due in its balance-sheet as at the relevant year-end, it does not know if, or to the extent, the same is paid up. All it was required to do was to issue a letter to the bank seeking the said information, i.e., even if, which again has not been shown, the payment/s stood realized by the bank directly, i.e., on disposal of the assets under its charge. In fact, the same could be readily shown in-as-much as the assessee, having booked the entire interest on both the accounts, which is only routed through the said accounts, non-payment of interest would lead to a corresponding difference in the bank balance/s, i.e., with reference to that reflected per the books of the bank, so that the assessee has, by implication, not reconciled its b....