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2017 (6) TMI 487 - AT - Income TaxAccrual of income - Cancellation of recovery of the interest - assessee calculated the interest on the delayed payments and served the debit notes to the allottee’s for not making the payment - customers refused to pay the interest and threatened to cancel the bookings thus the company cancelled the recovery of the interest in order to realize the principal amounts under the circumstances, the company had to reverse the income by debiting the profit and loss account - Held that:- Income Tax Act takes into account two points of time at which the liability to tax is attracted, the accrual of income or its receipt, but the substance of the matter is the income. If the income does not result at all, there cannot be a tax, even though in accounts, an entry is made about the "hypothetical income" which does not materialise. Where income has, infact, been received and is subsequently given up, in such circumstances it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an, entry to that effect may, in certain circumstances, have been made in the books of accounts. In the instant case the assessee raised the debit notes to the allottee's and booked the income in the books of accounts. The entry which was initially made as interest was reversed in the next year because in fact the nature of the transaction was changed and the assessee did not receive any real income. Therefore, the addition made by the Assessing Officer was rightly deleted, which does not need any interference on our part - Decided against revenue
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