Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of Where question for consideration was as to whether interest in respect of sticky loans was taxable, Assessing Officer should have taken into consideration Circular dated 9-10-1984 and decided question whether interest was in respect of those loans for which no recovery had been made for three consecutive years A bare perusal of CBDT Circular dated 9-10-1984 clearly shows that the assessee can take benefit only in respect of the interest payable on sticky loans where no recovery has taken place for three consecutive accounting years and it is only from the 4th year onwards that the interest accrued is not to be considered as income. Where the question for consideration was as to whether interest in respect of sticky loans was taxable, the Assessing Officer should have taken into consideration the Circular dated 9-10-1984 and decided the question whether the interest was in respect of those loans for which no recovery had been made for three consecutive years. Prakul Khurana and Ms. Seema Sood for the Applicant. Ms. Vandana Kuthiala for the Respondent. JUDGMENT Deepak Gupta, J.-The following questions of law have been referred for the opinion of this court at the instance of the assessee : "1.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest on sticky loans, a part of which was already assessed by the Revenue in subsequent years by accepting the cash system of accounting adopted by the assessee and for which no appeal was pending, as claimed by the assessee, could be assessed on accrual basis in the year relevant to the assessment year 1982-83 and that it was for the assessee to seek whatever remedy was available to it in those years ? 2.Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that in cases where suits had been filed and recovery proceedings initiated in courts of law, interest awarded by the courts shall relate back to the assessment year 1982-83 and not to the year in which the decision of the court is pronounced ?" The assessee is a financial corporation set up under the State…

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