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TMI Blog2015 (4) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... By this order, the Tribunal disposed of two appeals, one filed by the assessee and other by the Revenue, against the order, dated 14.05.1998, passed by the Commissioner of Income Tax (Appeals) (for short CIT(A)). The CIT (A) by that order, partly allowed the appeal filed by the assessee. The appeal before the CIT (A) was against the assessment order, dated 26.03.1997, passed by the Assessing Officer for the assessment year 1994-95 disallowing the claim of the assessee, seeking deduction of interest liability, that was converted/merged, by the financial institution, into a term loan under Section 43B of the Act. 2. The factual matrix to the extent it is relevant is that the assessee is engaged in the business of manufacturing Alluminium Ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion of interest into a term loan can be taken as a deemed payment for the purpose of Section 43B of the Act? 4. Mr.S.Vivek Chandra Sekhar, learned counsel appearing for the Revenue, at the outset, invited our attention to the provisions of Section 43B of the Act and contended that under any circumstances, in view of the insertion of Explanation 3C to Section 43B, inserted by the Finance Act, 2006 with retrospective effect from 01.04.1989, unless the amount of interest has been actually paid, cannot be allowed to be deducted as claimed by the assessee. In other words, he submitted that any sum payable as interest, referred to in Clause(d) of Section 43B of the Act, which has been converted into a loan or borrowing, cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat where a deduction in respect of any sum referred to in clause (c) or clause (d ) of this section is allowed in computing the income referred to in Section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, 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 this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 3A Explanation 3B Explanation 3C: For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) of this section, shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed by the Assessing Officer, applying the proviso to Section 43B of the Act. The assessee, thereafter, had filed an application under Section 154 of the Act explaining the reasons for claiming deduction. The application was, however, rejected holding that re-schedule of interest payment by means of a fresh loan cannot be treated as interest payment deductible under Section 43B of the specific repayment schedule. The Commissioner upheld the order of the Assessing Officer. The Tribunal held that disallowance was proper and permissible under Section 143(1)(a) of the Act and dismissed the appeal. Against that order, the assessee had filed appeal under Section 260A of the Act before the Karnataka High Court, wherein, the High Court while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the appeal of the assessee without referring to Explanation 3C appended to Section 43B of the Act. 9. As a matter of fact, from reading of Explanation 3C, in our opinion, the question as raised in the present appeals stands answered without further discussion. This provision was inserted for removal of doubts and it was declared that deduction of any sum, being interest payable under clause (d) of Section 43B of the Act, shall be allowed if such interest has been actually paid and any interest referred to in that clause, which has been converted into a loan or borrowing, shall not be deemed to have been actually paid. Thus, the doubt stands removed in view of Explanation 3C. This provision was considered by the Madhya Pradesh High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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