TMI Blog2015 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee because it is a hypothetical income and not a real income. In the light of this decision, if we examine the facts of the present case, then it would reveal that as far as loan given to M/s. S.S Industries Ltd are concern, these were given in the year 1990. The debtor has paid interest upto 1992, but thereafter stopped payment. The assessee has not recognized interest income from assessment year 1997-98, by that time more than three years have already been expired. Thus, alleged interest income cannot be assumed and deserves to be deleted As far as loan given to M/s. Khaitan Hostombe Spinels Ltd is concern, this loan was given on 08-07-1996. It is also in the same assessment year. The evidence produced by the assessee relates to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank, ld. JCIT/ Sr. DR ORDER Per: Rajpal Yadav: The present two appeals are directed at the instance of assessee against the separate order of Ld. CIT(A) dated 14-09-2011 passed for assessment years 1997-98 and 1998-99. 2. The assessee has taken as many as five/six grounds of appeal in both the assessment years under consideration, but its substantial grievance revolves around the additions/disallowances on the following issues:- A.Y 1997-98 A.Y 1998-99 a) Interest income Rs.2,74,315 Interest income Rs.5,25,000 b) Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting the interest, but did not account as income on the ground that the principal itself is doubtful and there is no idea to escalate the losses of the present assessment year by including such an income on the basis of accrual system of accountancy. The ld. AO in the second round of litigation has deputed an inspector to find out the facts and circumstances of the case. The inspector has reported vide his report dated 20-11-07 that M/s. S.S In Industries Ltd. was not in existence on the address provided by the assessee. He also reported that this company has filed I.T Return upto assessment year 2003-04. This company had declared itself as insolvent. Thus, the Hon ble High Court has appointed a special officer. The ld. AO on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, we are of the view that this issue is squarely covered by the decision of the Hon ble Supreme Court in the case of State Bank of Travancore Vs. CIT reported in 158 page 102. The Hon ble Court had accepted the preposition that if the financial condition of the debtor had deteriorated and from the history of its accounts, the recovery of the principal amount had become improbable and extremely doubtful rendering the sticky advances and as such interest thereon though debited to them following accrual system of accountancy, the alleged interest income would not be taxable in the hands of the assessee because it is a hypothetical income and not a real income. The chances of the recovery of the principal amount are dim and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see s factory premises. 9. On due consideration of the facts and circumstances, we are of the view that the AO has not brought any evidence on record suggesting that the assessee has closed down its business during the years under consideration. If there is temporary suspension in the manufacturing activity, then depreciation on the factory building cannot be denied. Therefore, we allow this ground of the appeal in both years and delete this addition of ₹ 20,321/- and ₹ 18,992 towards claim of depreciation. This issue of assessee for the assessment years 1997-98 1998-99 are allowed. 10. In the assessment year 1998-99, the AO has made the addition of ₹ 15,476/- towards travelling conveyance. The assessee has claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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