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TMI Blog2016 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee when debited such amount in the profit and loss account towards interest liability, the same was therefore rightly granted by the assessing officer. The Commissioner therefore committed legal error in disturbing such order of assessing officer. - Decided in favour of assessee - TAX APPEAL NO. 223 of 2007 - - - Dated:- 1-3-2016 - MR.AKIL KURESHI AND MR. Z.K.SAIYED, JJ. FOR THE APPELLANT : MR KM PARIKH, ADVOCATE FOR THE OPPONENT : MRS SWATI SOPARKAR, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the Revenue challenging the judgment of Income-tax Appellate Tribunal ('Tribunal' for short) dated 9.6.2006. While admitting the appeal following substantial ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded by ONGC. 4. During the financial year relevant to the assessment year 20022003 the assessee had debited such interest liability of ₹ 3.67 crores in its profit and loss account and accordingly claimed the same on the principle of mercantile accounting. The assessing officer allowed such claim. However, the Commissioner of Income-tax was of the opinion that the same was wrongly granted, since the liability to pay such interest did not crystallize during the said year. He, therefore, after putting the assessee to notice revised the order of assessment under his order dated 31.1.2006 and disallowed the claim of interest. Before the Commissioner the assessee had pointed out that subsequent to the judgment of the Supreme Court dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the assessee the simple interest was to be paid which was worked out at ₹ 3.67 crores. Thus, there was no dispute as regards the assessee's liability for interest amount of ₹ 3.67 crores. The only dispute which lingered on till April, 2002 was whether the assessee would pay compounded interest or simple interest. The Tribunal observed that the CIT would have been justified had the assessee claimed compound interest of ₹ 21.88 crores during the year under consideration, since the same was settled only in April, 2002. 6. It is this judgment the revenue has challenged in this appeal. The learned counsel Shri Parikh for the department submitted that the liability to pay interest was not a statutory liability and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were lost or destroyed. It was observed that such liability stands under the provisions of the said Act and was thus a statutory liability. It was held that such liability could be claimed in the previous year as per the provision made in the books. 9. Facts of the present case may be seen more closely, as noted, the assessee and other members of the Natural Gas Consumer Association had disputed their liability to pay revised charges for consumption of natural gas quoted by ONGC. Such issue came to be decided by the Supreme Court against the assessee and other members. The ONGC was allowed to recover the unpaid charges. However, in such judgment there was no clarification regarding interest to be charged on such delayed payment. It was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the consumers had granted 60 monthly equal installments for payment. 11. Seen from this angle, at any rate the assesse s liability to pay interest computed at simple rate was crystallized on 26.7.2001, and at no later point of time. Merely because the asseessee was negotiating with the ONGC alongwith other members of the association for softer terms and for charging simple interest instead of compound interest would not mean that this liability was in any manner contingent. The assessee when debited such amount in the profit and loss account towards interest liability, the same was therefore rightly granted by the assessing officer. The Commissioner therefore committed legal error in disturbing such order of assessing officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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