1 itxa309-08 sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.309 OF 2008 The Commissioner of Income Tax-1 ..Appellant. V/s. M/s. Kesar Petroproducts Ltd. ..Respondent. Mr. Vimal Gupta for appellant. Ms. A. Vesanjee with S.J. Mehta for respondent. CORAM : J.P. DEVADHAR AND MRS. MRIDULA BHATKAR, JJ. DATED : 1ST FEBRUARY, 2011 P.C. :- 1. Not on board. Taken up for admission by consent. 2. Where the interest liability payable by the assessee to a Financial Institution is discharged by issuing equity shares, can it be said that the interest is 'actually paid' within the meaning of Section 43B(d) of the Income Tax Act, is the question raised in this appeal. 3. The Tribunal has recorded a finding of fact that in the present case by virtue of a settlement package, the financial institutions 2 itxa309-08 agreed to accept 5% of interest by way of equity shares. Instead of making the payment in cash / cheque towards interest and then receiving back the amount in respect of equity shares, the financial institution agreed with the assessee company for accepting the payment of interest by subscribing to the equity shares of the company. What Section 43B(d) contemplates is that irrespective of the mercantile system of accounting followed by the assessee, the interest liability payable to the financial institutions would not be allowed in the year in which the liability is incurred but would be allowed in the year in which the deduction is actually discharged. In the present case, it is not in dispute that the interest liability has been actually discharged in the assessment year in question. Therefore, in the facts of the present case, the liability having been discharged in the year in question, the Tribunal was justified in allowing the claim of the assessee. In the result, we see no merit in the appeal and the same is dismissed with no order as to costs. (MRS. MRIDULA BHATKAR, J.) (J.P. DEVADHAR, J.)