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2016 (12) TMI 1771 - AT - Income TaxAccrual of income - income recognition - recognizing the notional interest income on outstanding debts when the interest is the subject matter of a decree before the Court - Addition on account of interest accrued on outstanding debt - assessee acquired the right of suit as per assignment deed and was entitled to recover the debt along with interest and cost of suit as per the deed of assignment of right - interest on debt which was receivable by Bank of Baroda, was now receivable to the assessee and as the assessee is following the mercantile system of accounting the assessee was required to offer interest income on debts on accrual basis - HELD THAT:- There is no dispute on the facts about the assessee acquiring the debts from the Bank of Baroda for a sum of ₹ 84,97,400/- with the borrowed funds, the loan creditors have not paid interest income to either bank or to the assessee, assessee has not recognised the income for all the assessment years under consideration etc. The legal issue i.e. to be decided on the right to recover the interest income by the assessee during the pendency of suit in Bombay City Civil Court. As examined the interpretation of the said section and the relevant explanation is already incorporated in the above paras of this order. We have considered the cited judgment of the Hon‟ble jurisdictional High Court in the case of Maharashtra State Financial Corporation Ltd [2005 (7) TMI 80 - BOMBAY HIGH COURT] . Also considered the reasoning given by the CIT (A) in paras 4.1.4 and 4.1.5 of his order. Considering the above, we are of the opinion, the conclusion drawn by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant grounds raised by the Revenue in all the four appeals are dismissed. Disallowance u/s 14A - as per CIT- A disallowance need to be limited to the dividend i.e. exempted income - HELD THAT:- CIT (A) discussed the issue at length and decided the issue. Therefore, in our view, the order of the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant ground raised by the Revenue dismissed.
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