JUDGMENT :

ABHAY AHUJA, J.

1. This is an appeal filed under Section 260-A of the Income Tax Act, 1961 (‘the Act’) by the Appellant-revenue impugning the order dated 16th January, 2017 passed by the Income Tax Appellate Tribunal (‘ITAT/Tribunal’) in Appeal No. 3314/Mum/2011 for the assessment year 2006-07 thereby allowing the appeal filed by the Respondentassessee. The Tribunal set aside the order dated 31st March, 2011 of the jurisdictional Commissioner of Income Tax exercising powers under Section 263 of the Act holding the assessment order dated 16th December, 2008 as erroneous and prejudicial to the interest of the revenue, as it allowed the claim for deduction made by the assessee in respect of the following:

(i) Deduction under Section 36(1)(vii) of the Act with respect to write off of interest receivable of Rs. 6,01,84,862/- forgone under the One Time Settlement (‘OTS’) entered into by the assessee with its borrowers.

(ii) Deduction under Section 36(1)(iii) of the Act with respect to Interest expenditure of Rs. 2,49,53,390/- incurred with respect to borrowings made for the slum rehabilitation project at Dindoshi.

2. Earlier, the assessee had filed its return of income for the prev