2005 (3) TMI 50

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....143(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") without making any adjustment. The Assessing Officer issued a notice to the assessee under sections 143(2) and 142(1) along with a questionnaire on September 26, 1996 and the case was taken up for scrutiny. While dealing with some other matters in the order of the assessment, the Assessing Officer specifically required the assessee to show cause why the provisions of interest of Rs. 49.23 lakhs should not be disallowed as the provisions amounted to unascertained liability. After granting opportunity to the assessee, the deduction for the said amount of interest was disallowed by the Assessing Officer vide his order dated November 20, 1996. Against this order, th....

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....ispute before us that the assessee had taken a loan from the Punjab National Bank and was in default of payment of its dues. The compromise was entered into between the bank and the assessee and it was on October 31, 1992. At the time of the compromise agreement, the total outstanding was Rs. 1165. 23 lakhs including a recorded interest of Rs. 915. 55 lakhs. This total liability was reduced to Rs. 499 lakhs payable in a phased manner with interest at 10 per cent, per annum on reducing balance. It was also pointed out that the assessee had made payments in terms of this agreement in the earlier financial years and by making a provision for interest at 10 per cent, as a default of compromise. As noticed in the order of the Commissioner of Inc....

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.... which the assessee had shown his liability for the previous years and which was accepted as a result of default or delay. The liability under the terms and conditions of compromise cannot be wiped out. It was not a unilateral act on the part of the assessee but was a bilateral consented action on behalf of the parties which was of binding nature in the terms of the agreement. As such it cannot be termed as an unascertained liability. The reliance by learned counsel appearing for the appellant on the case of Anamallais Bus Transports P. Ltd. case [1975] 99 ITR 445 (Mad) is misplaced inasmuch as, even there it was held that making a provision for bonus would be a contingent liability. It was further clarified that if the workers had raised a....