$ 1 * IN HIGH COURT OF DELHI AT NEW DELHI Decided on: April 30, 2015. + ITA 191/2003 COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. N.P. Sahni, Sr. Standing Counsel and Mr. Nitin Gulati, Jr. Standing Counsel. versus M/S EICHER LTD. ..... Respondent Through: Mr. Ajay Vohra, Sr. Adv., Ms. Kavita Jha and Mr. Vaibhav Kulkarni, Advs. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K. GAUBA MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) % 1. question of law framed in this case is as follows:- Whether funding of interest amount by way of term loan amounts to actual payment as contemplated by Section 43B of Income Tax Act, 1961? 2. assessee had claimed benefit of Section 43B of 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 assessee to benefit. Assessing ITA 191/2003 Page 1 Officer (AO) disallowed sum of 5,00,03,643/-. CIT (Appeals) reversed decision. Income Tax Appellate Tribunal (hereinafter referred to as ITAT ) upheld CIT (Appeals) s order on ground that payment under Section 43B included said constructive payment. 3. Income Tax Act, 1961 (hereinafter referred to as Act ) was amended by Finance Act, 2006 w.e.f. 01.04.1989. relevant provision added by virtue of this amendment reads as follows:- Section 43B, Explanation 3D. For removal of doubts, it is hereby declared that 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 loan or advance shall not be deemed to have been actually paid. 4. identical question had been framed by Telangana and Andhra Pradesh High Court in Commissioner of Income Tax-II v. Pennar Profiles Limited (framed and decided) I.T.A. No. 289/2003 decided on 11.02.2015. After noticing backdrop of similar facts, High Court held as follows:- 8. In this backdrop, we have perused provisions contained in Section 43B of Act, in particular, Explanation 3C thereof, which was inserted by Finance Act, 2006 with retrospective effect from 01.04.1989. This provision was inserted in 2006 and hence, this Court in Mahindra Nissans case, had no occasion to deal with case in light of this provision. Insofar as Karnataka High Court is concerned, though this provision was existing on date of judgment, it appears that it was not brought to notice of learned Judges and hence, Division Bench proceeded to consider and decide appeal of assessee without referring to Explanation 3C appended to Section 43B of Act. ITA 191/2003 Page 2 9. As matter of fact, from reading of Explanation 3C, in our opinion, question as raised in present appeals stands answered without further discussion. This provision was inserted for removal of doubts and it was declared that deduction of any sum, being interest payable under clause (d) of Section 43B of Act, shall be allowed if such interest has been actually paid and any interest referred to in that clause, which has been converted into loan or borrowing, shall not be deemed to have been actually paid. Thus, doubt stands removed in view of Explanation 3C. This provision was considered by Madhya Pradesh High Court in Eicher Motors Limited v. Commissioner of Income Tax to hold that in view of Explanation 3C appended to Section 43B with retrospective effect from 01.04.1989, conversion of interest amount into loan would not be deemed to be regarded as actually paid amount within meaning of Section 43B of Act. 10. It is not in dispute that assessment years with which we are concerned in present appeals are covered by Explanation 3C, which was inserted by Finance Act, 2006 with retrospective effect form 01.04.1989. In this view of matter, appeals filed by Revenue deserve to be allowed. Accordingly, we answer substantial question of law framed by us in favour of Revenue and against assessee. However, there shall be no order as to costs. 5. In light of above development which occurred during pendency of this appeal, question of law framed has to be answered in favour of Revenue. 6. Learned Counsel for assessee relies upon alternative submissions made noticed by CIT (Appeals) and ITAT contending that interest payment actually made for concerned Assessment Year ITA 191/2003 Page 3 (AY) 1993-94 at least ought to receive benefit of deduction under Section 43B. We noticed that this aspect was urged but was not considered by ITAT since larger issue was decided in favour of assessee. This question is accordingly remitted to AO who shall decide whether such payments were made and, if so, to what extent. If, in fact, such payments were made during concerned AY, benefit of Section 43B would, of course, be available. 7. appeal is partly allowed in above terms. S. RAVINDRA BHAT (JUDGE) R.K. GAUBA (JUDGE) APRIL 30, 2015 ik ITA 191/2003 Page 4 Commissioner of Income Tax v. M/s Eicher Ltd