Section 43B(d)

Section 43B(d) — the law in short

What the courts have decided on section 43B(d), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• M.M. Aqua Technologies Ltd v CIT Supreme CourtHelps taxpayerSuperseded by amendment
  I cleared accrued interest by issuing debentures to the lender. Does that count as payment under s.43B?
  Yes, on these facts and for the years before the law was changed. Issuing debentures that extinguished the liability to pay interest is actual payment, and Explanation 3C — a removal-of-doubts provision — only catches interest that stays unpaid and is merely converted into a fresh loan or borrowing.
• CIT v Gujarat Cypromet Ltd Supreme CourtHelps department
  The bank sanctioned a fresh loan and the outstanding interest was squared off against it. My books show no interest outstanding. Is that actual payment under section 43B?
  No. Where the accrued interest is not paid back but is adjusted against a further loan from the same institution, Explanation 3C to section 43B applies and there is no actual payment. The Supreme Court allowed the Revenue's appeal and restored the Assessing Officer's disallowance.
• Frontier Information Tech Ltd v DCIT High CourtHelps taxpayerNo later treatment found
  My lender took equity shares against the outstanding interest. The Assessing Officer says there was no actual payment under section 43B. Is he right?
  No. Where the liability to pay interest ceases to exist because shares have been issued to the lender, that is actual payment within section 43B, and Explanations 3C and 3D have nothing to bite on. The test the High Court applied is whether the liability to pay the interest stands extinguished.
• CIT v Rathi Graphics Technologies Ltd High CourtHelps taxpayer
  Under a negotiated settlement the lender took equity shares against interest due. Does Explanation 3C to section 43B catch that?
  No. Explanation 3C is directed at the conversion of interest into a loan or borrowing, where the liability continues in a different form. Where interest is converted into equity shares in the lender's name the liability is extinguished, there is no outstanding interest to that extent, and the conversion is actual payment for section 43B.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.