Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (11) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (11) TMI 122 - HC - Income TaxAccrual of income - Additional Finance Charges (AFC) also known as Overdue Charges (ODC) - Taxation in the light of Section 145 - Held that:- In the instant case, the Revenue is not in a position to show that due to the change of accounting method, the Revenue suffered loss. Admittedly, there is no finding to that effect in the assessment order. We also find that the change in method of accounting has not caused any loss to the Revenue, because AFC on receipt by the assessee-company has been offered to tax. Accordingly, we hold that the change of method of accounting of overdue charges from the mercantile basis to cash system insofar as AFC does not create any income, but the method of accounting only recognizes income. It would not be proper for the Department to contend that post amendment to Section 145 of the Income Tax Act, the change in the method of accounting adopted by the assessee should be re-looked. In the light of the decision of this court in the case of Annamalai Finance (2004 (10) TMI 51 - MADRAS High Court), we find no justification or good reason why we should reject the claim of the assessee. We have no hesitation to hold that collection and accrual of AFC happen simultaneously in the present case as and when received, as has been held by this Court. Hence, AFC cannot be treated as income on accrual basis. Following the decision of this Court reported in CIT V. Annamalai Finance Ltd [2004 (10) TMI 51 - MADRAS High Court] and CIT V. Annamalai Finance Ltd.(2009 (11) TMI 11 - MADRAS HIGH COURT), we hold that the terms of the agreements, which enable the assessee to demand overdue charges (AFC) is only an enabling provision and the recovery of overdue charges is not certain and is taxable on cash receipt basis and not accrual basis. Deletion of additions made towards Additional Finance Charges, also known as Overdue charges confirmed - Decided in favour of assessee.
|