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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 ..... t 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 Court in Eicher Motors Limited Vs. Commissioner of Income Tax (1996 (8) TMI 517 - MADHYA PRADESH HIGH COURT) to hold that in view of the Explanation 3C appended to Section 43B with retrospective effect from 01.04.1989, conversion of interest amount into loan would not be deemed to be regarded as actually paid amount within the meaning of Section 43B of the Act. It is not in dispute that the assessment years with which we are concerned in the present appeals are covered by Explanation 3C, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Extrusions. They had filed returns of income, showing loss of ₹ 3,25,34,484/-, on 29.11.1994. A notice under Section 143(2) of the Act was issued to the assessee by the Assessing Officer on 06.11.1995. After granting an opportunity of being heard to the assessees representative, the Assessing Officer completed the assessment vide order, dated 26.03.1997. It has come on record that the assessee had debited the funded interest of ₹ 85,42,788/- in its profit and loss account. In addition thereto, in the statement of computation of income, funded interest of ₹ 1,18,16,471/-, pertaining to the assessment years 1992-93 and 1993-94 was also claimed as deduction. Thus, the assessee had debited the funded interest of ₹ 2,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowing, cannot be allowed to be deducted or deemed to have been actually paid. 5. It would be relevant to reproduce the relevant portion of Section 43B of the Act, which reads thus: 43B.Certain deductions to be only on actual payment.- Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a).. (b).. (c).. (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; (e). (f). shall be allowed (irrespective of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng interest payable under clause (d) of this section, 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. Explanation 3D Explanation 4. 6. We have perused the orders passed by the authorities below and we find that the Tribunal, for dismissing the appeals filed by the assessee and the Revenue, placed reliance upon the judgment of this Court in Commissioner of Income Tax Vs. Mahindra Nissan Allywin Limited (1998) 233 ITR 0493 , in short, holding that the assessee is entitled to claim deduction of the interest liability to the financial institution which had been converted into a term loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before the Karnataka High Court, wherein, the High Court while allowing the appeal filed by the assessee in paragraph 13 observed thus: In view of what is stated above, we answer the substantial questions of law raised in this appeal by holding that the Tribunal was not justified in law in concluding that the funded interest could be said to be non-payment of interest in the relevant year to invoke the proviso to Section 43B of the Act to disallow the deduction of interest as claimed by the appellant. The Assessing Officer was not justified in law to make a prima facie adjustment in a proceeding under Section 143 (1)(a) of the Act by holding that there was no deemed payment of interest in the relevant year without appreciating the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation 3C. This provision was considered by the Madhya Pradesh High Court in Eicher Motors Limited Vs. Commissioner of Income Tax , to hold that in view of the Explanation 3C appended to Section 43B with retrospective effect from 01.04.1989, conversion of interest amount into loan would not be deemed to be regarded as actually paid amount within the meaning of Section 43B of the Act. 10. It is not in dispute that the assessment years with which we are concerned in the present appeals are covered by Explanation 3C, which was inserted by the Finance Act, 2006 with retrospective effect from 01.04.1989. In this view of the matter, the appeals filed by the Revenue deserve to be allowed. Accordingly, we answer the substantial question of la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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