Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of Accounting - System of accounting - Assessment year 1973-74 - Whether where assessee followed mercantile system of accounting, actual receipt of interest during relevant assessment year was not necessary as interest could have been taxed on accrual basis - Held, yes FACTS The assessee-company agreed to advance a certain sum to one 'C' Ltd. at the rate of 12 per cent p.a. interest. However it failed to advance full amount under the agreement. As no interest was received, the assessee did not shown any income from interest on the money advanced to 'C' Ltd. in the relevant assessment year. The Assessing Officer, however, noticed that the borrowing company had offered to pay interest at the rate of 8 per cent p.a. which the assessee had not accepted. Considering such facts, the Assessing Officer taxed the interest income on the basis of accrual as the assessee had been following mercantile system of accounting until 1972-73. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the view taken by the Assessing Officer. On reference : HELD When the assessee was following the mercantile system of accounting, actual receipt of the interest was not necessary and till 1972-73 the interest had been taxed on the basis of accrual. The assessee failed to satisfy the High Court as to when the interest had been accrued and taxed in just preceding year, i.e., 1972-73, why interest had not accrued in the year at hand. Accordingly, it was held that when the income of the interest had been taken as accrued and taxed in the just preceding year and there was no change in the facts and circumstances in the relevant assessment year as well, there was no infirmity in the order of the Tribunal. [Para 9] In the result, the reference was answered in favour of the revenue and against the assessee. [Para 10] CASES REFERRED TO CIT v. Motor Credit Co. (P.) Ltd. [1981] 127 ITR 572/ 6 Taxman 63 (Mad.) [para 6], Tamil Nadu Industrial Investment Corpn. Ltd. v.CIT [1999] 237 ITR 889 (SC) [para 6], CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 / 102 Taxman 94 (SC) [para 6], Saraswati Insurance Co. Ltd. v. CIT [2001] 252 ITR 430/ 116…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492