COMMISSIONER OF INCOME TAX Vs. JAIN STUDIOS LTD

JUDGEMENT

(1.) THIS appeal pertains to one issue only which concerns the interest paid by the respondent-assessee on the borrowed funds. There is no dispute that the interest was, in fact, paid. The only issue is as to whether this interest had accrued in earlier years or in the assessment year in question, viz., 2000-01, in which year the assessee had claimed the deduction thereof. According to the AO, such as deduction was not permissible in this year as the interest had accrued in the earlier years, which should have been claimed in those years only.

(2.) THE CIT(A), however, found otherwise and allowed the deduction, which has been affirmed by the Income-tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') as well vide impugned decision dt. 7th Nov., 2008. Though as many as five questions are proposed on the aforesaid issue, following two questions, out of these would reflect the nature of challenge which has been laid to the orders of the Tribunal :

(3.) THE assessee, however, could not pay the loan amount due to some financial problems and also due to the reasons that negotiations were going on for sale of assets. It requested RCL on 19th Feb., 1996 not to deposit the said cheque. The cheque was not deposited by the RCL. However thereafter, some disputes arose between the parties. According to the assessee, as a consequence of default in repaying the loan, it was deemed that RCL had purchased the shares pledged with it. With a result, the entire loan paid was paid off with interest. The assessee rather claimed that the RCL owned money to group concerns of the assessee. RCL disputed the above and demanded the amount from the assessee when the loan was not repaid, RCL filed Suit No. 3527 of 1998 for declaration against the assessee along with petition under art. XII of the letters patent. The assessee contested this suit by filing its affidavit in reply to the notice of motion filed by the RCL.