NDLI: M.m. Aqua Technologies Ltd. Vs. Commissioner of Income Tax, Delhi-iii

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income Tax Act 1961: s. 43B explanation 3C
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Income Tax Act, 1961: s. 43B explanation 3C – Certain deductions to be only on actual payment – Funding of interest amount by way of a term debenture, if amounts to actual payment – Appellant-assessee company had obtained loan from financial institutions for business operations on which is interest is payable – Assessee unable to discharge interest liability due to its financial hardship – It approached financial institution for a rehabilitation plan – In terms of the Plan, assessee issued convertible debentures in lieu of interest payment and then claimed a deduction u/s. 43B – Rejection of the claim, by the Assessing Officer holding that the issue of debenture does not tanamount to actual payment – However, CIT allowed the claim and the tribunal upheld the same – In appeal, the High Court held that interest had been converted into loan – On appeal, held: The issue of debentures by the assessee was under a rehabilitation plan, to extinguish the liability of interest altogether – No misuse of the provision of s. 43B was found by either the CIT or the ITAT – Explanation 3C, was meant to plug a loophole, cannot therefore be brought to the aid of Revenue – In case of any ambiguity in the retrospectively added explanation 3C, the three canons of interpretation come to the rescue of the assessee, first, the bona fide transactions of actual payments are not meant to be affected; second, a retrospective provision in a tax act which is “for the removal of doubts” cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood, thus, Explanation 3C is clarificatory-it explains s. 43B(d) as it originally stood and does not purport to add a new condition retrospectively; and third, any ambiguity in the language of Explanation 3C shall be resolved in favour of the assesse – Thus, the order passed by the High Court are set aside. s. 43 – Object of – Explaination of.
Judge	Hon'ble Mr. Justice R.F. Nariman
Neutral Citation	2021 INSC 397
Petitioner	M.m. Aqua Technologies Ltd.
Respondent	Commissioner Of Income Tax, Delhi-iii
SCR	[2021] 8 S.C.R. 237
Judgement Date	2021-08-11
Case Number	4742- 4743

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