TMI Blog2016 (1) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... en cancelled and the said company ran into deep financial crisis . There is no evidence on record brought by the AO to suggest that the assessee has actually received any interest from M/s. Ordyn Technologies Pvt. ltd. There is also no evidence on record which could suggest that there is any possibility of getting interest on debentures from the said company. Assuming for a moment that the assessee has purchased debentures cum interest and therefore the assessee must account for the interest, but at the same time there being no possibility of receiving interest, the same is allowable as a write off in the books. Therefore, we do not find any logic in making the addition of interest accrued and then allowing the same as a deduction as a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see on the funds deployed in optionally convertible debenture of M/s. Ordyn Technologies Pvt. Ltd., without appreciating the fact that M/s. Ordyn Technologies Pvt. Ltd. has debited the interest payable in its books of accounts and further as per clause 16.13 of the agreement, M/s. Ordyn Technologies was also liable to issue additional equity shares to compensate for any non-payment of interest on OCD until the conversion of OCD. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in placing reliance in the case of Kerala State Industrial Products Trading Corpn. Ltd. Vs ACIT Cir. 1(1), Trivandrum (ITAT Cochin Bench), Apex Court s decision in the case of Godhra Electricity Co. Ltd. Vs CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd justify its stand. In its letter dated 7.10.2011 the assessee explained that it got an opportunity for deploying funds at ₹ 22,40,21,918/- in optionally convertible debentures OCD) of M/s. Ordyn Technologies Pvt. ltd., which was to yield 16% interest per annum. The said fund was to be financed by IIISL @ 15.75% per annum. It was brought to the notice of the AO that due to heavy financial crisis M/s. Ordyn Technologies Pvt. Ltd., did not pay the interest on debentures issued by them and there is no certainty whether the company would be in a position to pay the interest, therefore interest on debentures was not recognized in the books though the liability to pay interest to IIISL was a certain liability and therefore interest on loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions, in the light of the documentary evidences placed before the First Appellate Authority, the FAA was of the opinion that the principle amount itself was in doubt, there was no logic in crediting interest by the assessee. The FAA further drew support from the decisions of the Hon ble Supreme Court in the case of Godhra Electricity Co. Ltd. Vs CIT 225 ITR 746 and CIT Vs Shoorji Vallabhdas and Co. 46 ITR 144 wherein the Hon ble Apex Court has held that: Income tax is levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability of tax is attracted viz., the accrual of income or its receipt, but the substance of the matter is the income. If income does not result at all, there cannot be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee is entitled to receive the interest. However, facts on record show that M/s. Ordyn Technologies Pvt. ltd., went into heavy financial crisis by which it was not in a position to pay the principle amount of debentures least to talk about interest on the said debentures. The assessee purchased the OCDs heavily banking upon the future prospects of M/s. Ordyn Technologies Pvt. ltd. However, it turn out to be that all the Government orders successfully bided by M/s. Ordyn Technologies Pvt. ltd. have been cancelled and the said company ran into deep financial crisis . There is no evidence on record brought by the AO to suggest that the assessee has actually received any interest from M/s. Ordyn Technologies Pvt. ltd. There is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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