TMI Blog2012 (6) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable certainty is lacking, the revenue recognition is to be postponed to the extent of uncertainty involved. In the instant case, the assessee did not account the interest income as there was uncertainty about its recovery. The apprehension or the situation foreseen by the assessee has been vindicated by the subsequent developments i.e. all the companies have gone into liquidation. Addition made on account of accrued interest income is directed to be deleted. See Brahamputra Capital & Financial Services Ltd v. ITO(2008 (4) TMI 361 (Tri)) - Decided in favor of assessee. - IT Appeal NOS. 256 & 257 (COCH.) of 2009 - - - Dated:- 8-6-2012 - N.R.S. GANESAN, AND B.R. BASKARAN, JJ. ORDER B.R. Baskaran, Accountant Member The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting of interest income. However, the Assessing Officer took the view that the said Circulars are applicable only to the commercial banks and hence the assessee cannot take support from them. The addition made by the Assessing Officer in both the years was confirmed by the Ld. CIT(A). Hence, the assessee is in appeal before us. 4. We have heard the rival contentions and perused the record. The details of loans given to the undertakings owned by Government of Kerala are furnished by the assessee in its written submissions and the same is extracted below:- Amount (Rs.) Govt. letter No. Date Interest accrued Terms of levy of interest 1. Keltron Counters Limited 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, it is stated as under:- "The only issue involved in these appeals is whether Commissioner of Income-tax (Appeals) Thiruvananthapuram was in order in confirming the assessment to income of notional interest of Rs. 34,65,000/- levied in the assessment of the above years on certain loans given by your appellant aggregating to Rs. 2,20,50,000/- to seven other public sector undertakings, wholly owned by the Govt. of Kerala, which had become sick and non-functional as on 31-03-2002. As on date, the names of the above loanee companies have been struck off from the register of the Registrar of Companies, Kerala (four companies have ceased to exist) and three are under liquidation under the supervision of the Court on account of extrem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company has taken a conscious decision not to charge interest on these loans during the above assessment years considering that the loan had become irrecoverable and bad. 2. The case of the appellant is that the loans had become totally bad and irrecoverable and hence there is no accrual of interest income on such bad/irrecoverable loans on facts of the case. It has been stated in page 4 of the appellate order of the learned Commissioner of Income Tax(Appeals) that "it was only when the loanee companies' financial position became bad and recovery became doubtful that the decision to treat the asset as non- performing has been taken at company's level and as such there is no direction from the Govt. of Kerala to that respect". This i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crual of income on such bad/irrecoverable loans on the facts of the case. Your appellant may also submit that the name of the appellant company has also been struck off from the Register of ROC as per communication dated 15-03-2011 and a copy of the same enclosed hereto)." 6. We have also heard the Ld D.R on this issue, who supported the order passed by Ld CIT(A). The assessee has advanced the loans cited above, apparently on the instructions from the State Government of Kerala. The assessee has provided interest up to the year ending 31.3.2002. Since it did not receive interest so provided and further when it came to its knowledge that these companies have become sick, the directors of the company took a conscious decision not to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nty involved - Full effect has been given by the as with regard to classification of assets as non-performing assets in terms of the prudential norms of RBI - Assessee was therefore justified in not showing the notional interest income, which did not atually materialize during the year under consideration." It is possible to say that the above said decision is rendered in the case of a Non-banking Financial company to which the prudential norms issued by RBI are applicable. However, the Guidance note on Accrual basis of accounting and the Accounting standard on "Revenue recognition" are applicable to all. In the instant case, the assessee did not account the interest income as there was uncertainty about its recovery. The apprehension or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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