TaxTMI 
TaxTMI 
2022 (3) TMI 39
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....hat the interest on loan borrowed from the Tamil Nadu Government and Infrastructure and Leasing Financial Services Ltd has accrued during the previous, even though the liability to pay interest cannot be stated to have accrued until after 5 years and that too, is payable half yearly instalments along with principal amount beginning from 1st May 2013 and ending with 1st November 2022?" 2.2. By order dated 21.12.2009, T.C.A.Nos.1382 & 1383 of 2009 were admitted on the following substantial questions of law: "Whether on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the interest on loan borrowed from Tamil Nadu Government Infrastructure and Leasing Financial Services Ltd had accrued during the previous year when the interest is actually payable only after the expiry of moratorium period of five years?" 2.3. This court admitted the appeals in T.C.A.Nos.87 & 483 of 2011 on the following substantial questions of law, vide respective orders dated 02.03.2011 and 08.11.2011: "(i) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that interest on loan borrowed fr....
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....any, was promoted jointly by the Government of Tamil Nadu and M/s.Infrastructure Leasing and Financial Services Limited (IL&FS), with a view to implement a project under Tirupur Area Development Program. A shareholders agreement was entered into between the Government of Tamil Nadu and IL& FS on 24.05.2000, as per which, apart from equity, the promoters agreed to provide the assessee company (TWICL) unsecured loan of Rs. 40 crores in the following proposition: (i)Rs. 25 crores by the Government of Tamil Nadu and (ii) Rs. 15 crores by IL&FS for implementing the said project. While so, the respondent / assessee filed its returns for the assessment years in question. After scrutiny of the same, the Assessing officer was of the view that as per clause 1.2 of Article 1 of the loan agreement, the liability to pay interest on the unsecured loan arises only after five years from the operation date; the assessee was not required to pay the interest until the moratorium period; and they can claim interest after the moratorum period when the liability crystalizes. Therefore, the Assessing officer disallowed the claim for interest payable to the Tamil Nadu Government and IL&FS and completed th....
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....ard both sides and perused the materials placed before this court. 7.In order to appreciate the submissions made on both sides, it is but necessary to refer to the relevant provisions of law, viz., Section 43 and Explanation 3C, which was inserted by the Finance Act, 2006 with effect from 01.04.1989, read as follow: "43B Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of Section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation in accordance with the terms and conditions of the agreement governing such loan or borrowing, or... ....
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....islative mandate removing this doubt and making the intention of legislature clear in relation to such transaction, it is not now necessary for this Court to interpret the unamended Section 43B in detail, nor it is necessary for this Court to take note of facts in detail as also the submissions urged in support of various contentions except to place reliance on Expln. 3C to Section 43B and answer the questions against the assessee and in favour of Revenue." The Court in Pennar Profiles Limited (supra) considered the decisions in Mahindra Nissan (supra), Vinir Engineering (supra) and Eicher Motors (supra) and held as follows: "8.In this backdrop, we have perused the provisions contained in Section 43B of the Act, in particular, Explanation 3C thereof, which was inserted by the Finance Act, 2006 with retrospective effect from 01.04.1989. This provision was inserted in 2006 and ITA 110/2005 Page 10 hence, this Court in Mahindra Nissans case, had no occasion to deal with the case in the light of this provision. Insofar as the Karnataka High Court is concerned, though this provision was existing on the date of judgment, it appears that it was not brought to the notice ....