TMI Blog1997 (12) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer considered that since the interest has already accrued, the same is to be included in the total income. The Assessing Officer, therefore, made an addition of Rs. 6,09,000 to the total income of the assessee. 3. In first appeal, the CIT (Appeals) considered that the assessee was charged interest @ 16% per annum in respect of the loans given by the assessee to its borrowers. Later, as per Board's decision dated 20-7-1983, the interest was reduced to 2% with effect from 1st April, 1982. It was argued before the CIT (Appeals) that the reduction took place during the year of account itself and that it did not represent expenditure relating to the earlier years. Though the CIT (Appeals) was aware that the decision was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has credited the interest to suspense account on sticky loans and has not shown such interest as income on the ground that principal as well as interest was doubtful of recovery. Therefore, the decision in the case of State Bank of Travancore is not applicable to the facts of the case. 7. In the case of Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC), the brief facts of the case were that the assessee, which was the managing agent of its subsidiary company, maintained its accounts on the mercantile system. It was entitled to receive an office allowance of Rs. 1000 per month, and a commission at 12 1/2% per cent. of the net profits of the managed company. In the accounting years ended on December 31, 1954 and December 31, 1955, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expenditure under section 10(2)(xv). The Supreme Court also held that income accrues when it becomes due. The postponement of the date of payment does not affect the accrual of income. The fact that the amount of income is not subsequently received by the assessee would not also detract from or efface the accrual of the income, although non-receipt may, in appropriate cases, be a valid ground for claiming deductions. The decision in the case of Morvi Industries Ltd. was followed by the Supreme Court in the case of CIT v. Shiv Prakash Janak Raj Co. (P.) Ltd. [1996] 222 ITR 583/88 Taxman 536. 8. In the case of Shiv Prakash Janak Raj Co. (P.) Ltd., the brief facts of the case were that the assessee company had advanced a loan to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versed the decision of the High Court and confirmed the order of the Tribunal and held that the Tribunal was right in taking the view it did in respect of the assessment years 1969-70, 1970-71 and 1971-72. Applying the ratio laid down in these two cases, Morvi Industries Ltd and Shiv Prakash Janak Raj Co. (P.) Ltd., in the case of the assessee, it is clear that the Board Resolution was passed on 20th July, 1983 i. e., after the end of the accounting year for the assessment year 1983-84. Therefore, the interest has accrued to the assessee on 31-3-1983 and accrual of interest is taxable in the hands of the assessee in the assessment year 1983-84. Subsequently events like, letters written in 1992 and 1993 by the Reserve Bank of India and Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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