Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2013 (9) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (9) TMI 17 - HC - Income TaxDisallowance u/s 36(i)(iii) - Whether assessee was liable to deduction u/s 36(1)(iii), on account of interest accrued in respect of capital converted into loan for the period 1st July, 1986 to 30th June, 1987 - Held that:- Profits and gain of business are computed on ordinary commercial principles. However, when there is a statutory interdict or stipulation, regardless of the ordinary commercial principles, the statute has to be followed. Section 36(1)(iii) of the Act does not help the appellant -assessee in form of any statutory interdict. There is no statutory provision that this amount should be allowed as interest accrued pursuant to the two letters dated 4th April, 1988 and 20th April, 1988 - under the ordinary principles of accountancy the two amounts were liabilities. It was only after letters dated 4th April, 1988 and 20th April, 1988, interest became payable and accrued liabilities were incurred. Interest became due and payable for the first time. Period for which interest became payable, is different and should not be confused with time/date when liability accrued. As per the ordinary principles of commercial accountancy, the said liabilities cannot be allowed as an expenditure in the earlier years. Payment of a liability is distinct from creation or accrual of the liability and under the mercantile system profits and gains of persons are computed on the basis of principle of accrual during the period for which profits and gains have to be computed. It is not material that the liability is to be discharged at a future date or by mistake or failure, no entry of the accrued liability was made in the books of accounts. An assessee will be entitled to a particular expenditure or deduction depending upon provisions of law and not on the basis of existence or absence of entries in the books, which are not conclusive. The same principle applies to accrual of income - Following decision of Additional Commissioner of Income Tax, Delhi-II versus Rattan Chand Kapoor [1984 (2) TMI 60 - DELHI High Court] - Decided against assessee.
|