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JUDGMENT Vishnu Chandra Gupta , J. - This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') has been preferred against the order dated 24.08.2007 passed by Income Tax Appellant Tribunal (in short 'the ITAT') in Income Tax Appeal No.55/LUC/2007 for the assessment year 2003-04, whereby the interest accrued during the said assessment year was treated as income of U.P. Chalchitra Nigam Limited (in short 'the Corporation') and observed that taxability on the aforesaid income of interest cannot be postponed on the ground of alleged impossibility of recovery. The relevant paragraphs i.e. 6 and 7 of the order impugned are as follows: '6. We have considered the rival submissions and have perused the record of the case. A perusal of the statements regarding accounting of interest in the case of Sikandarabad unit and Dariabad unit would reveal that assessee had accounted for interest and only in such years where it had received the amounts against the interest accrued to it but did not treat the interest income in those years where there was no recovery. This treatment was opposite to the system of accounting viz mercantile system of accounting regularly followed by the assessee. In mercantile system of accounting, the income accrues as soon as it has become due and it cannot be postponed to subsequent years based on the recovery against this amount. Specific statutory provisions are there in the statute to meet such contingencies. The real income theory has no role to play once the income had accrued to the assessee. In this regard, we may refer to the decision in the case of ITAT Delhi Bench in the case of Poysha Oxygen (P.) Ltd. v. Dy. CIT 91 ITD 616, wherein after examining various case laws, the Tribunal has observed as under: "From the combined reading of the case law, the following legal position emerges: (1) If the income does not result at all to the assessee then it cannot be taxed even though (i) such income might have hypothetically accrued; or (ii) entries are made in the books of account of such hypothetical income; (2) If the income, on mutual understanding is given up or surrendered by the assessee before its…

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