TMI Blog2017 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... de any addition in the A.Y. 2010-11 and 2011-12 on the basis of these facts in respect of interest and on the principle of consistency, we are of the view that it cannot be said that interest has accrued to the assessee during the year when the Inter-corporate deposits is equivalent to non-performing assets in the case of the assessee. Non-recognition of interest on loan advanced to Shri Sateesh Kumar - Held that:- The borrower has taken loan by way of pledge 1,26,540 shares of Enzen Global Solutions Private Limited owned by him having face value of ₹ 12,65,400/- along with a demand promissory note and two post dated cheques of ₹ 4,05,00,000/-. The assessee has recognized interest amount of ₹ 10,19,178/- during the F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% interest and the interest thereon was ₹ 60 lacs. In both the cases due to commercial consideration and financial position of the borrower, the assessee did not recognize any interest in its books of account. The assessment u/s. 143(3) was completed but the Assessing Officer did not make any addition in the income of the assessee. The CIT-7 vide his order, dated 09.01.2013, passed u/s. 263 of the Income tax Act, remanded the matter back to the Assessing Officer for the limited issue of non-recognition of the interest income on investment made by the assessee in Inter-corporate deposits and loan given to Shri Sateesh Kumar. The Assessing Officer therefore, conducted fresh assessment proceedings and made an addition of ₹ 1,05, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debenture twitters. Debentures amounting to ₹ 200,000,000 which became due for redemption on 21 November 2008 has not yet been redeemed by OK company and the interest (including default interest for non-redemption of debentures and non-payment of interest) due an such debentures amounting to ₹ 64,823,474/- has also not been paid. Further, the due date for redemption of debentures amounting to ₹ 32,000,000/- which fell due between 31st March 2008 and 31st March 2009, has been extended to 31st March 2010 by the debenture holder after the year end. The company has no dues payable to financial institutions. Statutory auditors of Ordyn have commented in Clause 5 of their report as explained below: We draw attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said amount till the date of making submissions. The interest income, in fact, has not accrued to the assessee. We noted that income tax is leviable on the real income and if no income has accrued to the assessee income tax cannot be levied. The question therefore arises whether any income has accrued during the year. It is not denied that the assessee being private limited company was following mercantile system of account as provided u/s. 145(1) of the Income tax Act. Section 145(2) empowers the Central Government to notify Accounting Standard in the Financial Gazette by any class of the assessee or in respect of any class of income in case the assessee did not comply with the Accounting Standard, could invoke the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced itself is doubtful, the question of accrual of interest, in our opinion, would not arise. Interest would have accrued to the assessee if it got enforceable right and interest would have been received by it. On the same analogy the interest in respect of the non-performing assets in the case of the bankers are not taken to be their income. Even otherwise also since the Revenue has not made any addition in the A.Y. 2010-11 and 2011-12 on the basis of these facts in respect of interest and on the principle of consistency, we are of the view that it cannot be said that interest has accrued to the assessee during the year when the Inter-corporate deposits is equivalent to non-performing assets in the case of the assessee. 5. Now coming t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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