9911796707
TMI Blog1998 (8) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 77,410 for the year under appeal. On scrutiny of accounts it was revealed that the assessee had not accounted for interest income amounting to ₹ 62,100 on advances of ₹ 32,93,297 given to M/s. Rampratap Bansidhar on the ground that borrower was not in a position to pay and was also disputing the rate of interest at 15%. Assessee had filed copies of correspondence which had ensued between it and the borrower. The Assessing Officer, however, was of the view that it was immaterial whether the borrower had paid the interest or not or whether he was in a position to pay it or not, when the accounts were maintained on mercantile basis. Hence addition was made of the impugned amount. 3. The CIT(A) noted that after much discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emently stressed upon. A similar argument, with greater force, was made before their Lordships of the Supreme Court in the case of State Bank of Travancore (supra). In response to the argument, the Supreme Court observed as follows (page 155) : "We were invited to abandon legal fundamentalism. With a problem like the present one, it is better to adhere to the basic fundamentals of the law with clarity and consistency than to be carried away by common cliches. The concept of real income certainly is a well-accepted one and must be applied in appropriate cases but with circumspection and must not be called in aid to defeat the fundamental principles of the law of income-tax as developed." The above observations were quoted with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the assessee is unequivocal, cannot be treated as evidence of the fact that income has not resulted or accrued to the assessee. After debiting the debtor's account and not reversing that entry but taking the interest merely in suspense account cannot be such evidence to show that no real income has accrued to the assessee or been treated as such by the assessee. (8) The concept of real income is certainly applicable in judging whether there has been income or not but, in every case, it must be applied with care and within well-recognised limits." 7. Of the above, point Nos. (1), (2), (4), (6) and (8) are very relevant for the case before us. However, before we resolve the dispute before us in the light of the above p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see-company gave up the managing agency commission from both the managed companies for the assessment years 1954-55 to 1956-57, after the end of the relevant financial years but before the accounts were made up by the managed companies. In the light of these facts, an important finding was given that the money became due to the assessee not at the end of the accounting year, but on the date of managed company made up its accounts. The Supreme Court observed that the assessee gave up its commission even before it accrued to it, i.e., before the managed company made up its account. For this reason it was held that the commission had not accrued to the assessee by or before the date it gave it up. 10. In the instant case, though not specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee firm. Under the new dispensation, the commission was to be reduced for the year 1947 as well as for future years, to which the assessee firm agreed. The two private limited companies were appointed as managing agents with effect from 1st January, 1948. Subse-quently, at the annual general meeting of the two managed companies held in December, 1948, the commission of the assessee firm was reduced, as already agreed [Emphasis Supplied]. The assessee firm, accordingly, gave up seventy-five per cent amount as its earnings in the assessment proceedings. The assessing authorities held that the commission had already accrued to the assessee during the previous year ending on 31-3-1948, and since the assessee had given up seventy- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rate had accrued to assessee. The first request from the borrower to reduce the interest came after the close of the year on 10-4-1987 when the assessee had already sent a statement of account showing interest calculation at the rate of 15%. For quite some time, the request was protested also by the assessee, and finally it agreed to the reduced rate on 27-7-1987. 17. Thus, in our opinion, considering the principles laid down by the Supreme Court in the various decisions discussed above, in the case before us, the assessee cannot escape its tax liability on the income of ₹ 62,100 accrued to it. Accordingly we restore the addition of ₹ 62,100 deleted by the CIT(A). 18. The second ground is against the order of the CIT(A) rest ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
