Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss/deductions - Allowable as - Assessment years 1996-97 to 1998-99 - Assessee entered into a contract with a Switzerland company 'Alimenta' for export of certain quantity of groundnut during period February to April 1980 - On account of ban imposed by Government of India assessee was prohibited from exporting balance quantity of groundnuts - Alimenta initiated arbitration proceedings, wherein assessee was directed to make payment of certain amount as damages with interest at rate of 10.5 per cent from 13-2-1981 to date of award, i.e., 15-11-1989 - In appeal, by order dated 14-9-1990, award was confirmed with some modification - In July 1993, Alimenta initiated proceedings for enforcement of award and also claimed interest at rate of 18 per cent per annum from date of award till date of payment. On 28-1-2000, High Court made award as a rule of Court and directed assessee to pay interest at rate of 18 per cent per annum from date of award till date of realization - During relevant assessment years, assessee claimed deduction of interest payable on damage awarded contending that liability to pay interest was a continuing liability - Whether liability on account of interest was to be deductible only when it got crystallized into a certain liability and that took place only on Court passing a decree on 28-1-2000 and awarding interest from date of award till date of realization - Held, yes - Whether, therefore, assessee could not claim deduction for interest in assessment years 1996-97 to 1998-99 - Held, yes FACTS The assessee was a registered society primarily formed with the object to market agriculture produce for the benefit of producers/farmers. It was also entitled to independently carry on its commercial activities. It entered into a contract with a Switzerland company 'Alimenta' for export of 5,000 MT HPS groundnut during the period February to April, 1980. On account of ban imposed by the Government of India, the assessee was prohibited from exporting balance quantity of HPS groundnuts. Alimenta initiated arbitration proceedings, wherein the assessee was directed to make payment of certain amount as…

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