1. These appeals under Section 260A of the Income Tax Act, 1961 (‘Act’) by the Revenue is directed against an order dated 17th January 2014 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 2894/Del/2011 and Cross Objection No. 60/Del/2013 relevant to the Assessment Year (‘AY’) 2002-03.

2. In respect of the Respondent/Assessee, a rehabilitation scheme was sanctioned by the Board for Industrial and Financial Reconstruction (‘BIFR’) on 1st November 2002. The scheme that was sanctioned was in fact prepared by the Industrial Development Bank of India (‘IDBI’), one of the major lenders of the Respondent. On the loans borrowed by the Assessee from IDBI, there was outstanding interest as on 31st March 2001. It was decided in a series of meetings that the IDBI could be allotted 14,30,000 equity shares of Rs. 10 each valued at Rs. 1.43 crores and the interest to the extent would be taken as having been paid as on 31st March 2002.

3. For the previous year ended on 31st March 2002, relevant to AY 2002-03, the Assessee filed a return on 31st October 2002 declaring a loss of Rs. 2,04,58,365. In computing the returned loss, the unpaid interest to the IDBI of Rs. 3,45,09,