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Judgment
Heard counsel for the parties. On the basis of the following substantial question of law, this appeal had been admitted by this Court:-
Whether on the facts and in the circumstances of the case the ITAT was justified in holding that the accrued bank interest for the financial years 1990-91 and 2992-92 relevant to the Assessment years 1991-92 and 1992-93 respectively were allowable in the Assessment years 1993-94 onwards on the basis of payment schedule framed under Rehabilitation Package dated 17.9.1992/21.3.1993 ?"
The facts in brief are that in response to the Department''s notice issued u/s 142(1) and 143(2), the assessee submitted that assessee was entitled to the benefit of payment of interest which he paid in view of rehabilitation package dated 17th September, 1992, which was the result of the settlement between the Bank and the assessees, from whom assessee took the loan. The Assessing Officer was of the view that the said payment of interest could not be treated to be capital expenditure and rejected the contention of the Revenue. However, so far as giving benefit of the payment of interest in the financial year 1993-94 is concerned, there was no justification in the view of the Assessing Officer because of the reason that according to the Assessing Officer, that interest liability was of the financial year 1990-91 and 1991-92 relevant to assessment year 1991-92 and 1992-93 respectively. According to the Assessing Officer as well as CIT (Appeals), even when there was settlement between the Bank and the assessee with respect to the payment of interest, the assessee should have debited interest for payment to the Bank in the relevant year and could not take benefit of payment of interest subsequent to the year in which interest liability accrued.
The Appellate Tribunal has given cogent reasons for rejecting the stands taken by the Assessing Officer and CIT (Appeals) in their orders and held that the amount of interest converted into a clean term loan was the same as calculated for the period 31st October, 1987 to 29th January, 1993 and thus, it cannot be said that the interest, which had arisen on the bank loan for the said period, became capital expenditure on conversion into clean term loan. After holding so, the Appellate Tribunal was of the opinion that the view taken by the CIT (Appeals) that despite pending rehabilitation package, the assessee should have debited the interest in the books of accounts for the earlier year on the basis of the liability as per earlier agreed rates of interest was wrong. We are, therefore, of the considered opinion that because of the dispute and pending proceedings for rehabilitation package, the assessee could not have debited that amount of interest accrued on the loan amount advanced by the Bank in the year in which that became due and in view of the settlement that if the liability accrued to the Bank to pay in terms of the rehabilitation package, then the assessee was liable to claim the benefit of payment of interest in the year 1992-93. In view of the above reasons, we do not find any merit in this appeal which is dismissed.