Case Law Details
Brief of the Case
In the present facts of the Case the Hon’ble High Court held that Explanation 3C to section 43B is having retrospective effect from 01/04/1989. Therefore, conversion of interest amount into loan would not be actually deemed to be actual payment.
Facts of the Case
The assessee is engaged in the business of manufacturing Aluminium Extrusions. They had filed returns of income, showing loss of Rs.3,25,34,484/-, on 29.11.1994. A notice under Section 143(2) of the Act was issued. The assessee had debited the funded interest of Rs.85,42,788/- in its profit and loss account. In addition thereto, in the statement of computation of income, funded interest of Rs.1,18,16,471/-, pertaining to the assessment years 1992-93 and 1993-94 was also claimed as deduction. Thus, the assessee had debited the funded interest of Rs.2,03,59,250/- being the interest due to the financial institutions relating to the assessment years 1992-93 and 1993-94 on account of availing of loans from them. The assessee claimed that the interest amount payable was converted into a principal amount/term loan and, therefore, it deemed to have paid the interest as contemplated by Section 43B of the Act and therefore, entitled for deduction by the Assessing Officer for the assessment year 1994-95 disallowing the claim of the assessee, seeking deduction of interest liability, that was converted/merged, by the financial institution, into a term loan under Section 43B of the Act.
Contentions of the Revenue
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