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2017 (5) TMI 1221 - HC - Income TaxAddition on waiver of interest - accrual of income - debtors’ inability to pay the interest for years - Tribunal in the rectification proceeding rejected assessee plea on the ground that it maintained mercantile system of accounting, the debts were not declared as bad debts and the assessee continued to receive back the principal sums from the borrowers - Held that:- Mere following of mercantile system ought not to result in accrual of income from interest when there is no interest income in real terms and the statements of account of the assessee also did not reflect any credit entry in respect of interest receipt from the aforesaid borrowers. Commercial decision was taken by the appellant-assessee not to charge interest from these two borrowers as the assessee wanted to ensure recovery of the principal sums lent. In absence of realization of real income and there being no accrual of such income subsequent to the aforesaid Board resolutions, interest income could not be added to the income of the assessee for the relevant financial year We find the points of law involved in this appeal are covered by Shoorji Vallabhdas (1962 (3) TMI 6 - SUPREME Court) and Poona Electric (1965 (4) TMI 20 - SUPREME Court ). The interest income could not said to have had accrued for the appellant for the assessment year in the background of the resolutions taken for waiver of interest. - Decided in favour of the assessee.
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