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2021 (10) TMI 1204 - AT - Income TaxAccrual of income - Addition account of accrued interest on seed money loans - classification of sticky advances - whether there was no basis for accounting said accrued interest income on cash basis as section 145(1)? - HELD THAT:- Admittedly, the respondent-assessee is following the mercantile system of accounting. It is the policy of the respondent-assessee company to account for the interest on such loans under seed money assistance scheme on receipt basis following the uncertainty of the recovery, realization of the interest. This policy is clearly stated in Clause (5) of Note No.23 read with 36 of Notes to Accounts forming part of Audited Financial Statements. Thus, material on record clearly indicates that there is uncertainty as to the recovery of the principal amount and interest on such advances. Therefore, the issue that comes up for our consideration is that whether can it be said that the interest had accrued on such advances when the assessee is following mercantile system of accounting. As decided in own case WESTERN MAHARASHTRA DEVELOPMENT CORPORATION LIMITED [2021 (6) TMI 1068 - ITAT PUNE] we do not find any merit in the grounds of appeal raised by the Revenue. Accordingly, the appeal filed by the Revenue stands dismissed.
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