Chitra Venkataraman, J.

1. This Tax Case Appeal is filed by the Revenue as against the order of the Tribunal relating to the assessment year 1995-96 raising the following substantial question of law:

"Whether in the facts and in the circumstances of the case, the Tribunal was right in holding that conversion of overdue interest into funded interest by the financial institutions would constitute actual payment of interest under Section 43B?"

2. The assessee claimed deduction under Section 43 B of the Income Tax Act as regards the payment of interest on the loans taken from ICICI Bank and PIPDIC. Admittedly, the assessee, following the mercantile system of accounting, made only a provision in the profit and loss account as regards the payment of interest on the loan taken. However, the assessee placed reliance on Board's circular, which specifically exempted the requirement of payment of sales tax covered under the scheme framed by the State Government and submitted that having regard to the provision already made in the profit and loss account, the assessee was entitled to the claim deduction under Section 43 B of the Income Tax Act. The assessee also produced letters from M