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2016 (8) TMI 64 - AT - Income TaxAccrual of income and expenditure - Real income - co-operative society - Provision on interest on share capital by assessee society - addition to profit of assessee trust - Held that:- We are of the opinion that the order passed by the authorities below are required to be set aside and the appeal of the assessee is required to be allowed. In our view, in case of Cooperative Society, there is a liability to repay the share capital to the members concerned. Once he ceases to be a member, therefore, the share capital in the hands of Cooperative Society cannot be treated with the share capital of the company, it could be treated as a borrowed capital. Further the assessee was following the mercantile system of accounting and any business expenditure relating to a financial year which is not paid during the financial year is required to be provided in the P&L account and the said provision will be set up with actual payment paid in the subsequent year. On the same analogy, the assessee made the provision for ₹ 23,97,359/- towards the interest on share capital in the P&L account for the financial year 2008-09 and the same was paid in the subsequent year. The interest paid on the share capital goes to reduce the interest collected by the society from its members and it did not form part of the profit. The making provision for the payment of interest on the share capital and paying the interest on the share capital will not make any change in the application of law. - Decided in favour of assessee.
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