TMI Blog2001 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... that the income by way of interest, waived by the assessee, was includible in its total income for the assessment years 1977-78 and 1978-79?" The assessment years involved are 1977-78 and 1978-79. The factual position as indicated in the statement of case is as follows: The assessee, Saraswati Insurance Company Limited, had a wholly owned subsidiary by the name of Saraswati Manufacturing and Trading Company Limited. The assessee had advanced certain loans to the subsidiary company on which payment of interest at 12 per cent. per annum was stipulated. Such interest was being charged from the very beginning up to and including the assessment year 1976-77 and it was also being included by the assessee in its total income. For the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day to day basis. The resolution of the assessee for the accounting year ending on December 31, 19 76, was passed only a few days before the close of the accounting year. By that time the bulk of the interest for that year had already accrued. Similarly, for the subsequent assessment year for which accounting year ended on December 31, 1977, the resolution waiving interest was passed after the close of the accounting year. In the circumstances, it was held that what was waived by the assessee was income which had already accrued to it according to the method of accounting regularly employed by it. On being moved for a reference the question as set out above has been referred. We have heard learned counsel for the Revenue. There is no ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concept of real income should not be so read as to defeat the provisions of the Act. (5) If there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee. (6) The conduct of the parties in treating the income in a particular manner is material evidence of the fact whether income has accrued or not. (7) Mere improbability of recovery, where 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 to a suspense account cannot be such evidence to show that no real income has accrued to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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