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2018 (11) TMI 482

the present case, it is not the case that the income has in fact accrued to the assessee. In fact, the recovery of the principal amount is in doubt. Moreover, the assessee has no where claimed as business advance, it was a simple loan on which the assessee was earning interest and offering the same for tax till A.Y. 2005-06, subsequent to it loan became bad and no interest was earned. Therefore, under the peculiarity of facts and in view of the judgement of the Hon'ble Supreme Court in the case of UCO Bank Vs. CIT [1999 (5) TMI 3 - SUPREME COURT] and State Bank of Indore Vs. ITO [2002 (7) TMI 90 - MADHYA PRADESH HIGH COURT] and the decision of the coordinate bench in the case of S.N. Chitale [2010 (5) TMI 934 - ITAT INDORE], we direct the A .....

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is observed by the A.O. that the loan was not given for business purpose. Against this, the assessee preferred an appeal before Ld. CIT(A) on the basis that no interest has been charged from the loans so given. As per appellant, the same has become sticky, however, at the same time, the interest has been charged as expenses and the profit & loss account has been debited by the interest expenses. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. The synopsis of the assessee is reproduced as under: 1. The Facts of the Case are mentioned on the Page 4 of the Order of Hon 'ble CIT(A). 2. The relevant portion of the assessment order is at Page 2 of the Order of Hon 'ble CIT(A) order. 3. The rel .....

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nterprises is not the relative of the assessee as defined in sub-section (41) of section 20f the Act. Even in case of relative only excessive and unreasonable expenses are inadmissible under clause (a) of sub-section 2 of section 40A of the Act. 9. The Ld. AO has not considered that the loans & Advance to M/S Karan Associates were given with the intension to earn interest. The interest earned in F.Y. 2005-06 has been offered to tax. 10. The Ld. AO has not considered the difference between not providing interest on sticky loans and interest free loans. It is not that interest free loans were given by the assessee. The present case relates to not providing interest on sticky loans. The recovery of principal arnount itself is doubtful. Leg .....

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ustified in including the interest amount in the income of the assessee. 12. The above decision has been followed by the Jurisdiction High Court in the case of State Bank of Indore vs. Commissioner of Income Tax (2002) 177 CTR (MP) 221 : (2002) 257 ITR 463 (MP) : (2002) 124 TAXMAN 725 Income-Accrual-lnterest on sticky loans- Credited to interest suspense account-Amount accrued but difficult to recoverand not in fact recovered-Not taxable in view of Circular No. F. 201/21/84-ITA-II dt. 9th Oct, 1984. 13. The above decision of Hon'ble Supreme Court is also been followed by High Court of Bombay in case of American Express International Banking Corporation vs. Commissioner of Income Tax(2002) 177 CTR (Born) 442 : (2002) 258 ITR 601 (Born) : .....

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r 2005-06 was duly offered to tax. He submitted that the authorities below failed to appreciate that there is a difference between not providing interest on sticky loans and interest free loans. He submitted in the present case that it is not the case where the assessee has given interest free loans. Reliance is placed on the judgement of the Hon'ble Supreme Court rendered in the case of UCO bank Vs. CIT 237 ITR 889. Further reliance is placed on the judgement of Hon'ble M.P. High Court in the case of State Bank of Indore Vs. CIT 257 ITR 463. We find that these judgements are given in respect of the banking company. Admittedly, the assessee is not a banking company. Reliance is placed upon the decision of the Tribunal in the case of .....

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