AI Drafter 
TaxTMI 
TaxTMI 
2017 (4) TMI 187
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....substantial question of law : "Whether the amount of Rs. 3,55,850 as difference of interest pay able to the Indian Overseas Bank, coming to the notice of the asses see-appellant during the year under consideration on reconciliation of accounts with the bank could be disallowed on the ground that it did not pertain to the year under consideration ?" 3. Counsel for the appellant has taken us to para. 11 of the order of the Assessing Officer, which reads as under : "The assessee company credited a sum of Rs. 207.71 lakhs in the profit and loss appropriation account. The assessee company was required in income. It filed reply vide letter dated February 19, 1998. As per this reply, the amount represented the liabilities whic....
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....e waiver is of Rs. 14,60,054. Since the write back is less than the amount under section 43B, therefore, no addition is required to be made under section 41(1) of the Income-tax Act. In respect of 10B, it was mentioned that the assessee has made a short provision of Rs. 3,55,850. Therefore, the assessee company made a claim that a sum of Rs. 3,55,850 should be allowed as deduction. However, another submission was also made vide letter dated February 1998. According to the 'A' company, the remission will be completed when the assessee company pays back the amounts which remains outstanding after write off part of the interest. Hence, remission is not complete and no amount can be added under section 41(1) of the Income-tax A....
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....mple interest and penal interest levied for the financial year 1992-93 to 1995-96 is concerned, it is to inform you that the details may be collected directly from our branch office, Alwar.' From RIICO letter : 'With reference to the above, the information is under preparation and will be submitted within a short time. It is submitted that the corporation is following the cash system of accounting in case of interest realisation. Accordingly, as and when the interest is received by the corporation, the same is treated as income of the corporation and offered for the tax. The same treatment has been given in the instant case. The funded interest is treated as income only as and when the amount is actually received b....
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....indly be allowed to the company. The company has paid Rs. 4,88,600 to RIICO and Rs. 4,46,425 to RFC during 1994-95 but not claimed as deduction as it is repayment of term loan.' I have considered the submission of the assessee company and have gone through the replies filed by RFC and RIICO. As per section 43B of the Income-tax Act, any deduction which is otherwise allow able in respect of any sum payable as interest on any loan or bo rowing from some specific institution in accordance with the terms and conditions of the agreement governing such loan or agreement is to be allowed only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. The word actually has been us....
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....d deferred scheme is treated as actually paid, the interest cannot be treated as actually paid. Obviously there is no such pro vision in the rules and regulations of the financial institutions, because they are not offering such income for tax on cash basis. Hence, the so-called funded-back interest is not allowed as interest under section 43B. In respect of another submission that the remission of liability is not taxable under section 41(1) of the Income-tax Act for the assessment year under consideration on the plea that the remission is conditional. I have gone through the agreement. As per this agreement a settlement has been arrived at. In the event of default, on the part of the assessee, financial institution, or written no....
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....ction. The Assessing Officer was of the view that the liability did not pertain to interest and therefore, not allowable. It was pointed out that on the basis of the claim the Assessing Officer has himself brought to tax an amount of Rs. 69,68,531 under section 41(1) though this waiver pertains to the earlier years. It was thus argued that when the Assessing Officer is charging to tax the waiver of interest as income then there is no rea son to not allow the short provision of interest which was noticed during the year on reconciliation. I have considered the argument of the appellant and find force in it. Since, the difference is located during the year on conciliation of account it is a liability for the year and therefore, the Assessing ....