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2023 (7) TMI 1085 - AT - Income TaxAccrual of interest expenditure / income - Disallowance u/s 36(1)(iii) - Applicability of AS-9 issued by the ICAI - CIT(A) deleted the additions - As per AO assessee was following Mercantile System of Accounting hence the interest income accrued on the advances is taxable - CIT(A) deleted the disallowance finding merit in the reasoning given by the assessee before it for the short charging of interest or noncharging of interest on the impugned advances, as there was no possibility of collecting the same since the principal amount of advance itself was overdue and not being collected, therefore the assessee had stopped charging interest on the same or was booking only the amount of interest actually received from the said party - HELD THAT:- We find no merit in this contention of the Revenue since it is a self-defeating argument. AS-9, issued by the Institute of Chartered Accountants of India, which is the parent body of the Chartered Accountant professionals, guiding and governing the professionals, prescribes manner of recognition of Revenue and it categorically states that revenue can be said to be accrued only when there is certainty of collection of the same. Therefore, where there is no certainty of collection, revenue cannot be said to be accrued at all. As per the Mercantile System of Accounting also, which follows accrual method of accounting, where there is no certainty of collection of revenue, income cannot be recognized. AS-9 is for the purpose of accounting for income on mercantile basis only. Therefore, the contention of the ld. DR that AS-9 had been incorrectly applied by the ld. CIT(A), while the mercantile system should have been applied is completely contradictory contention. No infirmity in the order of the ld. CIT(A) in holding that the short charging of interest on certain loan/advances given by the assessee and also non-charging of interest on certain other loans/advances was as per the Mercantile System of Accounting; and, therefore, there was no case for making any disallowance u/s 36(1)(iii) - Appeal filed by the Revenue is accordingly dismissed.
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