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TMI Blog2015 (11) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable. We do not find any error in the findings of the Revenue authorities- - Decided in favour of revenue. Disallowance of payment as per section 43B - whether the issuance of equity shares of the assessee-company to the financial institutions amounts to actual payment of interest liability or not? - Held that:- The conversion of interest into loan, and issuance of equity shares in lieu of interest payment being very basic similarity, therefore, does not amount to actual payment. in our opinion, Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. In other words, if an assessee has interest liability, and he converts that interest liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appellate Tribunal) Rules. They are descriptive and argumentative in nature. The assessee has filed concise grounds of appeal, which are taken on record. 3. The ground no.1 is general ground of appeal, wherein, the assessee has pleaded that the ld.CIT(A) has passed order without appreciating the facts and submissions of the assessee. No specific arguments were advanced on this issue, rather, it is an ancillary argument in support of other grounds. Therefore, no specific finding is required to be recorded. 4. The ground no.2 and 3 are inter-connected. In these grounds of appeal, the assessee has pleaded that the ld.CIT(A) has erred in confirming the disallowance of ₹ 4,62,427/-. 5. Brief facts of the case are the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the judgment of the Hon ble Madras High Court in the case of Bank of Madura Ltd. CIT, 261 ITR 749. He also relied upon the judgment of the Hon ble Delhi High Court in the case of CIT Vs. M/s. Shree Ram Pistons and Rings Ltd., 220 CTR (Del) 404. 8. The learned DR, on the other hand, relied upon the orders of the Revenue authorities. She contended that the expenses can be claimed, if they are related to the relevant accounting year. She also emphasized that the expenses are crystallized in this year, then also they can be claimed. But the assessee failed to demonstrate that this expenditure have been crystallized in this year. 9. We have duly considered rival contentions and gone through the record carefully. As far as the admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these financial institutions agreed to get paid for this amount of interest by way of equity shares of the respondent company to the extent of debt liability. The assessee has liability of ₹ 46,40,983/- towards IDBI and ₹ 14,38,282/- towards LIC. The ld. AO did not allow the claim of the assessee on the ground that the alleged payment in the shape of issuance of equity shares of the assessee-company to these financial institutions, does not amount to actual payment as per section 43B of the Income Tax Act, and therefore, the assessee cannot claim deduction. 12. Appeal to the CIT(A) did not bring any relief to the assessee. 13. Before us, the issue is whether the issuance of equity shares of the assessee-company to the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear very close resemblance. In both the cases, the assessee owes amount to the lenders. In both the cases, the account of lender will have a credit balance of the same amount, may be in different kinds of accounts in the books of the assessee. The conversion of interest into loan, and issuance of equity shares in lieu of interest payment being very basic similarity, therefore, does not amount to actual payment. in our opinion, Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. In other words, if an assessee has interest liability, and he converts that interest liability in further loan, then that will not amount to payment of interest under section 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stt.Year 2002-03. In our opinion, when in the first year no disallowance was made, and thereafter, in subsequent two years this 1/5th has been allowed, the AO is not justified to ask the assessee to establish its genuineness. Therefore, taking into consideration past history, we delete the disallowance. 19. In ground no.6, grievance of the assessee relates to charging of interest, under sections 234A, 234B and 234C of the Act. The charging of interest will be consequential in nature, and this ground is rejected. 20. In the ground no.7 the assessee has challenged initiation of penalty under section 271(1)(c) of the Act. To our mind, this is premature to challenge the initiation. The assessee will get chance to rebut the penalty when pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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