JUDGMENT CHITRA VENKATARAMAN, J Tax Case (Appeals) are at the instance of the assessee against the order of the Tribunal by raising following questions of law:- "(1) Whether on the facts and in the circumstances of the case the Tribunal is right in law in holding that the benefit of declaration under the Kar Vivad Samadhan Scheme is not available to the appellant in respect of the departmental appeal in I.T.A.No. 2015/Mds/98? (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the expenditure incurred by the appellant by way of interest and allowed by the Commissioner of Income Tax (Appeals) as wholly and exclusively necesasary for earning the income subject to tax is not eligible to be deducted in computing the income liable to tax? (3) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in concluding that the sum of Rs.20,00,000/- represents the appellant's income, while at the same time the interest which is allowed to be deducted by the Commissioner of Income Tax (Appeals) in computing the aforesaid income is not liable to be deducted?" 2. The facts in brief are as follows:- The assessee herein opted for the benefit of Kar Vivad Samadhan Scheme and accordingly filed an application by offering income at Rs.24,33,687/-. By proceedings dated 17.6.99, the Commissioner of Income Tax, the Designated authority passed an order in terms of Section 90 of the Finance (No.2) Act, 1998 treating the final settlement of tax arrears at Rs.5,88,684/-. It is a matter of record that in respect of interest payment of Rs.20 lakhs, which was referable to a loan taken from the Bank, which was utilised for the purposes of investment in a company promoted by the assessee, was sought to be disallowed by the Assessing Officer. 3. The assessee herein, an individual promoted a company by name M/s.Sugantha Sugars Limited. The shares therein were subsequently sold to Prudential Mouli Sugars Limited. On the question as to the returns on the sale of shares, M/s.Prudential Mouli Sugars informed that apart from refund of share deposits, a sumof Rs. 20 lakhs was paid towards the services rendered by the assessee in connection with the promotion of the company. The shares therein were subsequently sold to Prudential Mouli Sugars Limited. On the question as to the returns on the sale of shares, M/s.Prudential Mouli Sugars informed that apart from refund of share deposits, a sumof Rs. 20 lakhs was paid towards the services rendered by the assessee in connection with the promotion of the company. The books of accounts of the assessee showed the receipts of Rs.1,26,39,905/- by way of cheque and a sum of Rs.12,35,000/-through cash. Out of Rs.1,26,39,979/-a sum of Rs.99,77,000/-represented share deposit refund, Rs.20,00,000/-towards service charges, Rs.6,55,000/-towards payment to third parties and Rs.13905/- towards expenses. The assessee offered no explanation as to the sources for the expenditure of Rs.12,35,000/- and Rs.13,905/-. This was hence added as income from business/profession. The assessee's total income was arrived at accordingly. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals). The assessee contended that he had borrowed money from the Bank for acquiring shares of Sugantham Sugars Ltd. and had paid bank charges therein. As the money was used for obtaining the shares, the interest and other charges paid to the Bank should be allowed as a deduction in the computation of income offered at Rs.20 lakhs, it being the amount received for rendering services. The said issue was considered in the assessment to the extent of Rs.7,01,079/-for the assessment year 1993-94. The Commissioner of Income Tax (Appeals) agreed with the assessee that the interest paid to the Bank for investment in shares was merited to be considered for deduction. The Commissioner of Income Tax (Appeals), however, directed the officer to compute the actual interest paid to the Bank and deduct the same from the taxable income. Any other receipt by way of refund on interest was to be taxed in the year of such receipt. However, on the other issues, the appellate commissioner granted partial relief. The Order of the Commissioner of Income Tax (Appeals) was however appealed against by the assessee and by the Revenue too. As far as the assessee's appeal is concerned in I.T.A.No.2034 of 1998, he objected to the addition made in respect of foreign trip, addition on the expenses incurred through credit card, reimbursement of expenses of Rs.12,46,965/-and the remand made on the deduction claimed on the interest payment made to the Bank as against the receipt of Rs.20 lakhs towards service charges. The Revenue preferred an appeal to the Tribunal in I.T.A.No.2015 of 1998 on the claim on the interest payment to the Bank on the money borrowed for the purpose of investment in Sugantham Sugars Ltd. The Revenue contended that the investment of the borrowed funds were in non-income earned assets and hence, the corresponding interest could not be allowed. In any event, if interest was to be allowed, it should be only Rs.7,01,079/-. 4. As far as the appeal preferred by the assessee was concerned, considering the offer made by the assessee under the Kar Vivad Samadhan Scheme 1998, nothing remained for the Tribunal to proceed further with the assessee's appeal and the same was withdrawn by the assessee. As regards the Revenue's appeal before the Tribunal was concerned, the assessee took a specific stand that after the determination of the tax payable under the Kar Vivad Samadhan Scheme, nothing survived in the Revenue's appeal for the Tribunal to pass orders on merits. In making such a contention, the assessee placed reliance on the decision of the Apex Court reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627, wherein it was held that once on the declarant made the assessee had made the payment of the tax amount as determined under Section 90, the assessee enjoyed the immunity under Section 91. In the circumstances, it was no longer open to the Tribunal to deal with the Revenue's appeal on merits. However, the Tribunal rejected the case of the assessee and pointed out that as on the date of the furnishing of the application under Kar Vivad Samadhan Scheme, the Revenue's appeal was pending before the Tribunal. The assessee did not verify the pendency of the Department appeal. As the income involved in the Revenue's appeal was not the subject matter of the declaration made by the assessee, the question of Revenue's appeal automatically coming to end on the determination under Section 90 of the Kar Vivad Samadhan Scheme would not arise. Aggrieved by this, the assessee is on appeal before us. 5. As the income involved in the Revenue's appeal was not the subject matter of the declaration made by the assessee, the question of Revenue's appeal automatically coming to end on the determination under Section 90 of the Kar Vivad Samadhan Scheme would not arise. Aggrieved by this, the assessee is on appeal before us. 5. Placing reliance on the decision of the Delhi High Court reported in (1999) 236 ITR 1 ALL INDIA FEDERATION OF TAX PRACTITIONERS v. UNION OF INDIA, wherein the proviso to Section 92 was struck down and the clarification issued on 17.12.1998 accepting the said decision, learned counsel referred to the decision of the Karnataka High Court reported in(2008) 219 CTR 300 – BHAWARALAL (HUF) v ASSTT. CIT also referred to the circular issued by the Central Government in Clarification bearing No. 149/ 152/ 1998 TPL dated 17.12.1998 and submitted that when once the Designated Authority determined the tax payable by the assessee notwithstanding the apparent failure in not including the amount involved in the Revenue's appeal and the mistake in not including the same attributable to Revenue's own lapse, the declaration could not be found fault with so as to leave the Revenue's appeal to be continued before the Tribunal. 6. Laying stress on the decision of the Apex Court reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627, learned counsel pointed out that once declarant makes payment of the amount determined under Section 90, immunity under Section 91 springs into effect. Thus, reading in the context of KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627 as well as (1999) 236 ITR 1 – ALL INDIA FEDERATION OF TAX PRACTITIONERS v. UNION OF INDIA, the question of further dealing with the Revenue's appeal by the Tribunal does not arise for the Revenue to contend that the pendency of the appeal would not come to an end by reason of the certificate issued in the declaration made by the assessee under the Kar Vivad Samadhan Scheme. 7. 7. Countering the said statement of the assessee, learned counsel for the Revenue pointed out that the clarification given on 17.12.1998 after the decision of the Delhi High Court clearly pointed out that the embargo to proceed with the appeal on the certificate issued on the declaration would arise only in those cases of cross appeals dealing with the self same issues before the appellate authority and that when the declaration filed by the assessee evidently did not include the issue raised in the appeal filed by the Revenue, it is not open to the assessee to contend that on the determination of the amount payable under Section 90, the appeal filed by the Revenue would not be available for further proceeding thereon on merits before the Tribunal. In the circumstances, there could be no inhibition on the part of the Tribunal to get along with the appeal on merits. 8. Heard learned counsel for the appellant as well as learned standing counsel for the Revenue. 9. Before going into the various contentions raised in the appeal, the provisions relating to the time and manner of payment of tax arrears, the effect of the declaration and the order made on the pending appeal as provided under Section 90 and 92 of Kar Vivad Samadhan Scheme, 1998, need to be seen. The said provisions read as follows: 90. Time and manner of payment of tax arrears:- (1) Within sixty days from the date of receipt of the declaration under section 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the sum payable after such determination towards full and final settlement of tax arrears. Provided that where any material particular furnished in the declaration is found to be false, by the designated authority at any stage, it shall be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived. Provided further that the designated authority may amend the certificate for reasons to be recorded in writing. Provided further that the designated authority may amend the certificate for reasons to be recorded in writing. (2) The declarant shall pay, the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the declarant. 92. Appellate authority not to proceed in certain cases:-No appellate authority shall proceed to decide any issue relating to the disputed chargeable expenditure, disputed chargeable interest, disputed income, disputed wealth, disputed value of gift or tax arrear specified in the declaration and in respect of which an order had been made under Section 90 by the designated authority or the payment of the sum determined under that section : Provided that in case an appeal is filed by a Department of the Central Government in respect of such issue relating to the disputed chargeable expenditure, disputed chargeable interest, disputed income, disputed wealth, disputed value of gift or tax arrear (except where the tax arrear comprises only penalty, fine or interest), the appellate authority shall decide the appeal irrespective of such declaration. 10. A reading of the said provision show that once an order has been made on the declaration filed, there is a total ban on the hearing of the appeal on any issue covered under the declaration. However the proviso made an exception in respect of the appeal filed at the instance of the Revenue that such declaration would not have any effect on the hearing of the Revenue's appeal. Dealing with the vires of the proviso thus making an exception to the Revenue's appeal, in the decision reported in 236 ITR 1 – ALL INDIA FEDERATION OF TAX PRACTITIONERS v. UNION OF INDIA, Delhi High Court held that the proviso to Section 92 of the Finance Act (No.2) Act, 1998 is ultra vires article 14 of the Constitution as it results in creating two artificial classes between the same class of assessees, i.e. the litigating assessees in arrears and the definition of tax arrears in clause (m) of Section 87 of the Finance (No.2) Act, 1998, particularly with reference to the appeal filed at the instance of the Revenue pending before the Appellate Forum. The Delhi High Court pointed out that the proviso to Section 92 of the Finance Act (No.2) Act, 1998 results in creating two artificial classes between the same class of assessees, one being appellant in the appeal before the Appellate Forum and other being the assessee as respondent in the Department's appeal. The Delhi High Court read down the proviso contained in Section 92 and pointed out that no sub classification could be made in the class of litigating assessees. Once a liability to pay the tax was incurred and determined on or before March 31, 1998, the assessee would be treated to be in arrears in spite of his having succeeded at one stage of the litigation if the Revenue has chosen to continue with the litigation and there is no reason why the benefit of the scheme should be denied to him. To this extent, the scheme is discriminatory and violative of article 14 of the Constitution. Pointing out that all the assessees litigating and in arrears belong to one class, the Delhi High Court held that any attempt at carving out further classes by reference to who is the prosecutor/ appellant/ applicant in the pending litigation is void as based on no intelligible differentia. The provisions apart from being arbitrary, irrational and evasive, have no rational relation to the object sought to be achieved by the Act. 11. Admittedly, the said decision of the Delhi High Court was accepted by the Revenue. The CBDT ultimately passed a clarification dated 17.12.1998 in F.No.149/145/98-TPL, which reads as under: KVSS Your attention is invited to the judgment dated 17th November 1998 by Hon'ble Delhi High Court in the above case and the Press Release issued by the Government conveying the acceptance of the judgment by Central Government. A copy of the above Press Release has already been sent to you along with DO letter No. 142/44/98- TPL dated 1st December, 1998 from Member (L). 2. Following the above judgment of Delhi High Court, the Government has decided that the assessees who want to make declaration under KVSS in respect of taxes involved in the appeals filed by the Department can do so. 2. Following the above judgment of Delhi High Court, the Government has decided that the assessees who want to make declaration under KVSS in respect of taxes involved in the appeals filed by the Department can do so. Such declarations shall be regulated as under: (i) The assessee has the option of filing declaration either in respect of arrears disputed in his appeal or of taxes involved in Departmental appeal or for both independently of each other. (ii) For declarations relating to Departmental appeals also the existing Form No. IA can be used. In such cases, there are no outstanding taxes and hence the process of working out "disputed income" from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute "dispute income" on which the sum payable can be determined. In respect of Departmental appeals, the declaration has to be for the entire income disputed in such appeals. (iii) Where the declaration in respect of Departmental appeals are accepted by the designated authority, the CIT may proceed to withdraw such appeals on passing of the order under section 90(2). (iv) In the event of cross appeals on same issue, if the assessee does not opt to declare in respect of taxes involved in Departmental appeals, the provisions of Section 92 would not apply as these place bar only in respect of issue covered in the declaration in respect of which order under Section 90 has been passed. This will also be the position, if the assessee does not opt for declaration in respect of other Departmental appeals. The appeals in all such cases should not be withdrawn. 3. The designated authorities working under your region may kindly be informed accordingly. " 12. The said clarification was considered by the Karnataka High Court in the decision reported in 219 CTR 300 – BHAWARALAL (HUF) v. ASSTT. CIT. The assessee therein made a declaration to avail the benefit of the scheme under Kar Vivad Samadhan Scheme, 1998 under Section 88 and paid the tax determined by the Commissioner of Income Tax. " 12. The said clarification was considered by the Karnataka High Court in the decision reported in 219 CTR 300 – BHAWARALAL (HUF) v. ASSTT. CIT. The assessee therein made a declaration to avail the benefit of the scheme under Kar Vivad Samadhan Scheme, 1998 under Section 88 and paid the tax determined by the Commissioner of Income Tax. At that time, the assessee's appeal as against the order of the Commissioner of Income Tax (Appeals) on the disallowed cost of construction, character of the rent and the receipt from the tenant was pending in appeal before the Income Tax Appellate Tribunal against the portion of the Commissioner of Income Tax (Appeal) order granting relief to the assessee, the Revenue also had gone on appeal before the Income Tax Appellate Tribunal. Evidently, while determining the arrears payable by the assessee as per Section 90, the Commissioner of Income Tax did not take into account, the dispute involved in the Revenue's appeal before the Tribunal. On the question as to whether the assessee has to file two declaration forms, the Karnataka High Court considered the decision of the Apex Court reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627 as well as (1999) 236 ITR 1 – ALL INDIA FEDERATION OF TAX PRACTITIONERS v. UNION OF INDIA and the clarification issued by the Board and pointed out that when the assessee had filed its declaration, admittedly, the appeal by the Revenue was also pending. Hence, the determination by the designated authority on the tax arrears would necessarily have to take into consideration the issues involved in the assessee's appeal such arrears including what was raised in dispute by the Revenue by way of an appeal. The Karnataka High court further pointed out that a duty was cast on the designated authority to arrive at the correct amount payable by the declarant, notwithstanding that the declaration might not have included the tax arrears in dispute which was sought to be raised by way of an appeal by the Revenue. The High Court pointed out: "............. The determination by the designated authority of the tax arrears would necessarily have to take into consideration such arrears including what was raised in dispute by the Revenue by way of an appeal. The High Court pointed out: "............. The determination by the designated authority of the tax arrears would necessarily have to take into consideration such arrears including what was raised in dispute by the Revenue by way of an appeal. This was a duty cast on the designated authority notwithstanding that the declaration may not have included the tax arrears in dispute which was sought to be raised by way of an appeal by the Revenue. It was open to the designated authority to have called upon the assessees to avail the benefit of settlement only if all tax arrears, including those which are disputed by the Revenue and which are pending in appeal as on the date of such determination, are paid. .............." 13. The Karnataka High Court pointed out that it was open to the Designated Authority to call upon the assessees to avail the benefit only if all tax arrears including those issues which are disputed by the Revenue, which are pending in appeal as on the date of such determination are paid. Thus Section 90 requires the designated authority to determine the amount payable in accordance with the provisions of the Scheme and the sum payable after such determination towards the full and final settlement of the tax arrears. Upon payment of such amount determined under Section 90(1), it is conclusive and the scheme could not be reopened. Once determination is made, failure to include the dispute raised by the Revenue in its appeal being attributable to the Revenue's own lapse, the same cannot be put against the assessee for the purpose of proceeding further with the appeal filed before the Tribunal. Thus, the Karnataka High Court held, "............ The Revenue having failed to do so in the present case and having issued a certificate of the tax arrears for the assessment year, notwithstanding the apparent discrepancy, insofar as the tax arrears in relation to the dispute sought to be raised by the Revenue in its appeals, was not part of the said declaration, is attributable to the Revenue's own lapse and hence, there is no substance in the contentions put forth by the Revenue. " 14. " 14. In the context of the said decision, with which we agree, the fact remains herein today that when once the Designated Authority passed an order on 17.6.1999 determining the tax payable at Rs.5,88,684/-, the order thus determining the final sum payable by the assessee in respect of the tax arrears is conclusive. It is so irrespective of whether the dispute raised by the Revenue in its appeal is included in its offer or not, as pointed out by the Karnataka High Court, a duty is certainly cast upon the Revenue to consider the entirety of the case to arrive on the final determination. If the Revenue failed to do so, as stated by the Karnataka High Court, the Revenue has to suffer for its own lapse. On that score, the assesee could not be faulted on the amount determined as per Section 90. 15. Learned counsel for the assessee pointed out that as on the date of filing of its application under the Samadhan Scheme, admittedly, no notice was served on the assessee as regards the pending Revenue's appeal before the Tribunal. Even when the order was passed under Section 90 of the Samadhan Scheme, the appellant had no knowledge about the pendency of the appeal. We hold irrespective of whether the assessee had knowledge or not, when once the amount payable by the declarant in accordance with the provisions of the Act was determined by the Designated Authority, viz., the Commissioner of Income Tax, it amounts to the department having bestowed its attention to the entirety of the tax arrears to pass order under Section 90. Thus as held in the decision of the Kartanaka High court that once final determination is made, further hearing on any pending appeal before the Appellate forum for passing order on merits is not possible. Even as per Section 90 of the Kar Vivad Samadhan Scheme, only where the declaration furnished by the assessee is found to be false by the designated authority at any stage, all the proceedings against the declarant shall be deemed to have been revived, thus enabling the designated authority to amend the certificate for reasons in writing. Even as per Section 90 of the Kar Vivad Samadhan Scheme, only where the declaration furnished by the assessee is found to be false by the designated authority at any stage, all the proceedings against the declarant shall be deemed to have been revived, thus enabling the designated authority to amend the certificate for reasons in writing. In the absence of any such situation arising herein, the Revenue cannot sustain its plea that irrespective of determination made under Section 90, the appeal would nevertheless be kept, treating as one pending for further consideration at the hands of the Tribunal. 16. It may be of relevance to note that the assessee's declaration was accepted and the amount payable was determined by the Commissioner of Income Tax in his proceedings dated 17.6.1999. The said order was despatched on 15.7.1999. A perusal of the file produced show that the Revenue's appeal before the Tribunal was filed on 7.7.1999, by which time, the Samadhan Certificate had already been made. 17. Going by the above facts and further pointed out by the Apex Court in the decision reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627, once determination is made under Section 90 towards full and final settlement of tax arrears, there is nothing to be treated as pending for final consideration before any authority which includes the Tribunal. 18. In the result, the order of the Tribunal is set aside. The substantial question of law is answered in favour of the assessee and against the Revenue. No costs. Consequently, connected TCMP is closed.