The division bench of Madras High Court upheld the decision of ITAT holding that the assessee is entitled for deduction under Section 43B of the Income Tax Act with respect to the interest on loan waived by the bank in one time settlement.
The Commissioner of Trichy challenged the ITAT order on the substantial questions of law raised by the Tribunal i.e, Whether Tribunal was right in holding that the assessee is entitled for deduction under Section 43B of the Income Tax Act, with respect to the interest on loan waived by the Bank in one time settlement?.
The Counsel for the appellant submitted that, the Tribunal has erred in holding that the assessee is entitled for deduction under Section 43B with respect to the interest on loan waived by the bank in one time settlement. He further submitted that the Tribunal ought to have appreciated that the assessee having not actually paid the interest, no deduction under Section 43B is warranted.
The appellant has also contended that under Section 43B of the Act, interest would be allowed in the case where the same was paid to the financial institution on or before filing of return of income. Since the entire interest was waived by IDBI Bank, there was no actual payment. Therefore, the claim of the assessee for deduction under Section 43B cannot be allowed.
While rejecting the appellants contentions, the division bench comprising Justice S.Manikumar and Justice D.Krishna Kumar observed that, the Tribunal was right in holding that the assessee is entitled for deduction under Section 43B of the Income Tax Act, with respect to the interest on loan waived by the Bank in one time settlement and thus, answered the substantial question of law against the revenue.
Read the full text of the order below.
