We do not find any error in the approach of the authorities below. Merely because the interest was debited in the books of accounts maintained on mercantile basis would not mean that the interest had become due and accrued because admittedly the interest liability would become due not during the relevant previous year but only for the first time on 18.11.1996. Thus, interest cannot be said to have accrued to become due and payable in the relevant previous year. The stand of the assessee is incongruous because on the one hand it claims that interest became due and accrued in the relevant previous year however in the same breadth it admits that the same would be due and payable only with effect from 18.11.1996. The concept of debiting the books maintained on mercantile basis is on the principle that the payment has become due and payable and since it has become payable it is therefore debited in the books of accounts. Admittedly, in the present case the interest was not due and payable from the relevant previous year. Further, the provision of Section 43B(d) directly and categorically dis-entitles the assessee company to claim benefit of interest deduction because with respect to interest due and payable to a financial institution such as the IFCI till the interest is actually paid, the same cannot be allowed as a deduction. reproduced below:-
“43B. Certain deductions to be only on actual payment
Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of —
….. ………. ………….. ………
(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a state financial corporation or a state industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing;
…… …. …………. ……….
Shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him:
The aforesaid provision makes it more than abundantly clear that interest can only be allowable when the same is actually paid and not merely because the same is due as per the method of accounting adopted by the assessee. Any other interpretation as suggested by the appellant that the interest should be allowed even when not actually paid will defeat the very purpose of Section 43B. The contention of the assessee that it has received the loan from Sugar Development Fund administered by the Ministry of Sugar, Government of India, is liable to be rejected at the threshold because admittedly the loan is obtained from IFCI by the assessee. It is the IFCI with whom the documentation for the loan has been signed and to whom the loan along with the interest is repayable. Merely because the Sugar Development Fund is under the overall control and administration of the Ministry of Sugar, Government of India does not mean that the loan is not given by the IFCI. The other contention raised by the appellant relying upon the judgment of the Andhra Pradesh High Court in the case Srikakollu Subba Rao & Co. and Ors. Vs. Union of India and Other, 173 ITR 708 that where the amount is not due for payment before the end of the relevant previous year such amount though having accrued could not be disallowed under Section 43B(d) of the Act, cannot be accepted by this Court because the same would negate the intention of existence of Section 43B(d) and would render otiose the expression “actually paid “occurring in the provision. Further we feel that in view of the categorical language used in the relevant provision, we need not refer to the other sub-sections and exceptions of Section 43B.