TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 173
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....see company on 30.10.2001 thereby declaring total loss of Rs.3,71,26,980/-. During the course of filing of return, the assessee company had also furnished Profit & Loss A/c Book and Balance sheet etc. The Assessing Officer had processed and scrutiny assessment was made under Section 143(3) read with Section 145(3) of the Act and had passed assessment order dated 30.03.2004 thereby determining total income of an amount of Rs.11,52,285/-. 3.2 Thereafter, on verification of the record, the Assessing Officer found that the assessee company had claimed deduction of an amount of Rs.5,00,87,126/- under the head of the interest paid to ICICI Bank on Term Loan. The said amount also included the value of Rs.27,00,000/- equity shares of Rs.10 each issued by the company in lieu of accumulated interest for an amount of Rs.2,70,00,000/-. This lead to reopening of the assessment of the year under consideration which was followed by a Notice dated 20.03.2006 under Section 148 of the Act. The said notice was served on the assessee on 24.03.2006. 3.3 In response to the said Notice issued under Section 148 of the Act, the respondent - assessee company had submitted return of income on 17.04.2006 th....
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....respective parties, the ITAT agreed with the view of the CIT(A) that the shares have been allowed in the year under consideration in lieu of the outstanding liability of the assessee is ultimately a payment of the amount and consequently such payment results into discharge of the liability in the year under consideration. Thus, the ITAT find no error of law against the order of the CIT(A) in deleting the aforesaid addition made by the Assessing Officer and thereby rejected the aforesaid appeal of the Revenue. Hence, the Revenue department has approached this Court. 4. We have heard Mr. Manish Bhatt, the learned Senior Counsel assisted by Mr. Munjaal Bhatt, the learned counsel appearing for the appellant - Revenue department and Mr. Darshan Patel, the learned counsel appearing for the respondent - assessee company. We have also carefully examined the record and have also perused the judgments/decisions relied upon by the learned counsel appearing for the respective parties. The only short issue which falls for our consideration relates to the provisions of allowance under Section 43B of the Act. 5. Mr. Manish Bhatt, the learned Senior Counsel for the department has made a strenuou....
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..... Thus, it is submitted that there is nothing in the provision much less with the retrospective effect, by which the conversion of interest into shares has been described as not amounting to actual payment for the purposes of Section 43B of the Act. The learned counsel appearing for the respondent - assessee has placed reliance upon the decision of the Supreme Court in the case of M.M. Aqua Technologies Ltd. Vs. Commissioner of Income Tax, Delhi-III passed in the Civil Appeal Nos.4742-4743 of 2021. 8. By referring to the aforesaid decision, the learned Counsel appearing for the respondent - assessee has placed much reliance upon Para-20 by drawing analogy in the facts of the case where the Supreme Court has treated issuance of debentures as against the "actual payment" of interest acceptable more particularly, when ultimately it extinguished the liability to pay interest. 9. We have extensively heard the learned counsel appearing for the respective parties and have also perused the record, relevant provisions of law and the decisions relied. The only short issue involved in this appeal is that whether the issuance of equity shares as against the payment of outstanding interest ca....
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....rge the same. For some reasons or the other, undisputed liabilities also are not paid. 35.3 To curb this practice, the Finance Act has inserted a new section 43B to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or 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 shall irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income of that previous year in which such sum is actually paid by the assessee. 35.4 The section also contains an Explanation for the removal of doubts. The Explanation provides that where a deduction in respect of any sum aforesaid is allowed in computing the income of any previous year, being a previous year relevant to the assessment year 1983-84, or any earlier assessment year, in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under section 43B in respect of such sum on the ground that the sum has been actually paid by....
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....ferred to in Section 43B(d), with which we are concerned, does not refer to the mode of payment, unlike Proviso 2 to the said Section, which was omitted by the Finance Act, 2003 w.e.f. 1st April, 2004. The said Proviso reads as follows: "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date." 20. This being the case, it is important to advert to the facts found in the present case. Both the CIT and the ITAT found, as a matter of fact, that as per a rehabilitation plan agreed to between the lender and the borrower, debentures were accepted by the financial institution in discharge of the debt on account of outstanding interest. This is also clear from the expression "in lieu of" used in the judgment of the learned CIT. That this is so is clear not only from the accounts produced by the assessee, but equa....
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....he transfer by not less than 15 per cent of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is understated or in other words, shown at a lesser figure than that actually received by the assessee. Sub-section (2) has no application in case of an honest and bona fide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the condition of 15 per cent difference between the fair market value of the capital asset as on the date of the transfer and the full value of the consideration declared by the assessee is satisfied. .... xxx xxx xxx 15. It is therefore clear that sub-section (2) cannot be invoked by the Revenue unless there is understatement of the consideration in respect of the transfer and the burden of showing that there is such understatement is on the Revenue. Once it is established by the Revenue that the consideration for the transfer has been understated or, to put it differently, the consideration actually received by the assessee is more than what is declared or disclosed by him, sub-section (2) is immediately attracted,....