The assessee, a Government of West Bengal undertaking and an NBFC, had paid EMIs on a term loan, but by inadvertence the entire EMI amount (including interest) was shown as repayment of principal. The mistake was detected after assessment and the assessee raised an additional ground before the CIT(A) claiming deduction of Rs. 1,40,77,397 being interest actually paid to the bank. The Tribunal allowed the claim. The assessee had also created a sinking fund through recurring deposits of varying tenures for redemption of infrastructure bonds; as interest on such deposits was payable only on maturity, no interest was accounted for annually. The AO taxed notional accrual of such interest for AYs 2001-02 and 2002-03. The Tribunal deleted the addition. The Tribunal also deleted addition of interest on NPAs not accounted for by the assessee. On appeal, the High Court upheld the Tribunal and held that interest actually paid on term loan was allowable u/s 43B(d) in the year of payment irrespective of method of accounting, even if not debited to the profit and loss account and not claimed in the return or revised return. It further held that where the Tribunal’s factual finding that interest on recurring deposits/sinking fund accrued only on maturity was not disputed, and the entire accrued interest had been offered to tax in AY 2005-06, no tax could be levied during the subsistence of the deposit tenure. The deletion of addition in respect of interest on NPAs not accounted for was also upheld. (AY. 2001-02,  2002-03)