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TMI Blog2019 (2) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... said disallowance. - Decided against assessee. - Civil Appeal No(s). 5347/2010 - - - Dated:- 21-2-2019 - Ashok Bhushan And K. M. Joseph, JJ. For the Appellant : Mr. Sanjay Jain, ASG Mr. Rupesh Kumar, Adv. Mr. Arjun Garg, Adv. Mr. Devansh Srivastava, Adv. Mr. Yuvraj Sharma, Adv. Ms. Saniya Scott, Adv. Mrs. Anil Katiyar, Adv. Mr. B. V. Balaram Das, AOR ORDER We have heard Mr. Sanjay Jain, learned ASG appearing for the appellant. Despite service, no one is present on behalf of the respondent. This appeal has been filed against the judgment dated 31.08.2006 passed by the High Court of Gujarat in Tax Appeal No. 231 of 2006, whereby the High Court dismissed the Tax Appeal filed by the appellant. The respondent assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 75,26,10,769/-. The fact that the entry pertaining to the interest element outstanding to financial institutions referred at page 2 of the order by the Assessing Officer has been reversed after receipt of funds of ₹ 8 crores from IDBI substantiates the contention of the appellant company that the entries relating to interest outstanding with reference the above institutions have been squared up and its place a new credit entry of loan of IDBI is now appearing in the balance sheet as on 31.03.2001. The plea of the appellant s counsel Shri Tanna that since no interest payment is outstanding now and the amount is paid off, the expenditure of interest is allowable u/s 43 B. It is further added that in case the loan had been disbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores and claims that the interest was adjusted in the said loan which is squarely covered by Explanation 3C to Section 43B. He has placed reliance on the judgment of Madhya Pradesh High Court in Eicher Motors Limited v. Commissioner of Income Tax [(2009) 315 ITR 312] and the judgment of Delhi High Court in Commissioner of Income Tax, Delhi v. MM Aqua Technologies Ltd. [(2015) 376 ITR 498]. He submits that the High Court erred in relying on the judgment of Gujarat High Court in Commissioner of Income Tax v. Bhagwati Autocast Ltd. [261 ITR 481], which was a case not referring to Section 43B(d) and was not appropriate to be relied on in the facts of the present case. He further submits that the case of Bhagwati Autocast Ltd. (supra) relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2006 w.e.f. 01.04.1989 which is to the following effect: 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, 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. The Appellate Authority has noticed the facts in para 2.2 as extracted above which needs no repetition. The interest liability which accrued during the relevant assessment year was not actually paid back by the assessee rather was sought to be adjusted in the further loan of ₹ 8 crores which was obtained by the IDB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee and in favour of Revenue. The Court in Pennar Profiles Limited (supra) considered the decisions in Mahindra Nissan (supra), Vinir Engineering (supra) and Eicher Motors (supra) and held as follows: 8. In this backdrop, we have perused the provisions contained in Section 43B of the Act, in particular, Explanation 3C thereof, which was inserted by the Finance Act, 2006 with retrospective effect from 01.04.1989. This provision was inserted in 2006 and ITA 110/2005 Page 10 hence, this Court in Mahindra Nissans case, had no occasion to deal with the case in the light of this provision. Insofar as the Karnataka High Court is concerned, though this provision was existing on the date of judgment, it appears that it was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the assessee was entitled to, and it did not involve an instance where it was converted into a loan or borrowing within the meaning of Explanation 3C. It is perhaps for this reason that Explanation 3C was not discussed. In the impugned judgment, the Gujarat High Court has relied upon Bhagwati Autocast Ltd. (supra) which was not a case covered by Section 43B (d) rather was a case of Section 43B (a). The provision of Section 43B covers a host of different situations. The statutory Explanation 3C inserted by the Finance Act, 2006 is squarely applicable in the facts of the present case. It appears that the attention of the High Court was not invited to Explanation 3C, we are, thus, of the view that the Assessing Officer has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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