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2019 (11) TMI 1233 - AT - Income TaxAccrual of interest - Non recognising interest against the advance - accrual method of accounting - HELD THAT:- The undisputed facts are that the assessee is a company and following mercantile assessment of accounting. The assessee primarily relied on the copy of the letter issued by M/s. Seahorse Hospitals Limited dated 01.12.2004, wherein M/s. Seahorse Hospitals Ltd., confirmed the receipt of ₹ 1,10,00,000/- from the assessee company and also confirmed the terms of repayment of loan. Loan carried interest at the rate of 10.5% per annum. Therefore, the interest accrues and arises as on the last day of the previous year in which the assessee’s accounts are closed. Once the interest is accrued, it has to be charged to tax in accordance with the method of accounting, i.e., mercantile system, employed by the assessee. The treatment between the parties or the subsequent settlement between the assessee and the other party is not affecting the chargeability of tax. Therefore, the interest accrued at the rate of 10.5% on the impugned loan for the period 01.12.2004 to 31.03.2005 is assessable during the period relevant to this assessment year and accordingly the amount levied by the AO and sustained by the appellate authority is held as in order. The assessee’s corresponding plea are dismissed.
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