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2012 (6) TMI 269 - AT - Income TaxIncome - accrual - interest on sick advances - NPA - assessee-company, wholly owned by the Government of Kerala, engaged in the business of marketing of products manufactured by M/s. TTPL, advanced money to various other Government of Kerala undertakings on direction of Government of Kerala - non-accounting of interest income on ground of advances becoming sick - Revenue contended accounting of same since assessee was following the mercantile system of accounting - Held that:- Guidance Note on Accrual Basis on Accounting issued by the ICAI lays down that where the ultimate collection with reasonable certainty is lacking, the revenue recognition is to be postponed to the extent of uncertainty involved. In the instant case, the assessee did not account the interest income as there was uncertainty about its recovery. The apprehension or the situation foreseen by the assessee has been vindicated by the subsequent developments i.e. all the companies have gone into liquidation. Addition made on account of accrued interest income is directed to be deleted. See Brahamputra Capital & Financial Services Ltd v. ITO(2008 (4) TMI 361 (Tri)) - Decided in favor of assessee.
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