COMMISSIONER OF INCOME TAX Vs. EICHER LTD

JUDGEMENT

(1.) THE question of law framed in this case is as follows: - "Whether the funding of the interest amount by way of a term loan amounts to actual payment as contemplated by Section 43B of the Income Tax Act, 1961 -

(2.) THE assessee had claimed benefit of Section 43B of the Income Tax Act, 1961 in respect of conversion of its interest liability before Financial Institutions (IFCI, IDBI and HDFC Bank), asserting that this did not amount to "payment". Thus, this entitled the assessee to the benefit. The Assessing Officer (AO) disallowed the sum of Rs. 5,00,03,643/ -. The CIT (Appeals) reversed the decision. The Income Tax Appellate Tribunal (hereinafter referred to as "the ITAT") upheld the CIT (Appeals)'s order on the ground that payment under Section 43B included said constructive payment.

(3.) THE Income Tax Act, 1961 (hereinafter referred to as "the Act") was amended by Finance Act, 2006 w.e.f. 01.04.1989. The relevant provision added by virtue of this amendment reads as follows: - "Section 43B, Explanation 3D. For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (e) 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 advance shall not be deemed to have been actually paid."