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2016 (4) TMI 1087 - AT - Income TaxInterest on sundry debtors - Held that:- The debtor went into liquidation and the matter is pending before the BIFR. On further verification of the details submitted by the assessee, we find that the lenders have taken the possession of the assets of the company and given notice for auction. Under these circumstances, the A.O. was incorrect in charging interest on the outstanding debtor balance, when recovery of principal is in doubtful. The Assessing Officer, simply estimated the interest on the outstanding debtor balance based on the assessee own admission for the previous financial year. We do not see any merit in the contention of the Assessing Officer for the reason that the Assessing Officer cannot sit in the chair of the businessman and direct him to do business in a particular fashion. The outstanding amount due from the debtor is on account of trading liability. It is not a case of the Assessing Officer that the outstanding loan amount is a stock in trade of assessee and assessee is in the business of money lending to charge interest on the outstanding balance by following the mercantile system of accounting. Though, assessee charged interest for the last financial year, he explained the reasons for not charging the interest for the current financial year under consideration. From the perusal of the facts, it appears that the reasons given by the assessee appears to be reasonable. Therefore, we are of the opinion that charging interest on trade debtors is not correct. The CIT(A) after considering the relevant facts and circumstances of the case, deleted the additions made by the Assessing Officer. We do not see any error or infirmity in the order passed by the CIT(A). - Decided in favour of assessee.
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